Question :
51. Rate of return common shareholders’ equity (ROCE) A. measures a firm’s performance : 1245981
51. Rate of return on common shareholders’ equity (ROCE)
A. measures a firm’s performance in using and financing assets to generate earnings and explicitly considers financing costs.
B. a measure of profitability that incorporates the results of operating, investing, and financing activities.
C. equals net income (less dividends on preferred stock, if any) divided by average common shareholders’ equity.
D. all of the above
E. none of the above
52. A small leverage ratio may indicate that a company is
A. well managed.
B. financed with a relatively large amount of common shareholders’ equity.
C. financed with a relatively large number of shares of common and preferred stock.
D. financed with a relatively large amount of debt.
E. financed with a relatively large amount of debt and preferred stock.
53. Which of the following ratios is not a measure of profitability?
A. rate of return on assets
B. rate of return on common stockholders’ equity
C. earnings per share of common stock
D. rate of return on preferred stockholders’ equity
E. all of the above
54. Which ratio measures a firm’s performance in using assets to generate earnings independent of how the firm financed acquisition of those assets?
A. rate of return on assets
B. rate of return on common stockholders’ equity
C. earnings per share of common stock
D. rate of return on preferred stockholders’ equity
E. none of the above
55. The numerator of the rate of return on common shareholders’ equity
A. is the amount of earnings assignable to common shareholders’ equity after subtracting all amounts required to compensate other providers of financing for the use of their funds.
B. subtracts from net income any earnings allocable to preferred stock equity, usually the dividends on preferred stock declared during the period.
C. does not subtract the dividends on common stock because such dividends represent distributions to common shareholders of a portion of the returns generated for them during the period.
D. all of the above
E. none of the above
56. The rate of return on common shareholders’ equity
A. will exceed the rate of return on assets whenever the rate of return on assets exceeds the after-tax cost of borrowing and any dividends required for preferred shareholders.
B. will not exceed the rate of return on assets whenever the rate of return on assets exceeds the after-tax cost of borrowing and any dividends required for preferred shareholders.
C. will always exceed the rate of return on assets.
D. will never exceed the rate of return on assets.
E. none of the above
57. Using lower cost borrowed funds and earning a higher rate of return on those funds than their cost
A. increases the return to the common shareholders.
B. is a phenomenon called financial leverage.
C. requires the common shareholders to take on more risk in their investment.
D. all of the above
E. none of the above
58. Financial leverage
A. may increase the return to the common shareholders.
B. uses lower cost borrowed funds and earns a higher rate of return on those funds than their cost.
C. requires the common shareholders to take on more risk in their investment.
D. all of the above
E. none of the above
59. Financial leverage
A. increases the return to the common shareholders during good earnings years.
B. uses lower cost borrowed funds to earn a higher rate of return on those funds than their cost.
C. decreases the return to the common shareholders during bad earnings years.
D. all of the above
E. none of the above
60. The rate at which accounts receivable turnover
A. indicates how quickly a firm collects cash.
B. equals sales revenue divided by average accounts receivable.
C. is often expressed in terms of the average number of days that elapse between the time the firm makes the sale and the time it later collects the cash.
D. all of the above
E. none of the above
