Multiple Choice Answers

1. While determining the most profitable company from the given number of companies, which of the following would be the best indicator of relative profitability?
Highest net income
Highest retained earnings
Highest return on equity
Highest operating margin

2. On January 1, 2005, Systil Corporation issues $50M 10 year bonds with a coupon rate of 10%. Interest is payable annually at the end of the year. If the required return on bonds of similar risk at January 1, 2006 is 8%, what will be the price of the bonds be at this date?
$56.71M
$56.25M
$44.24M
$43.86M

3. Which of the following is not a common tool used in financial statement analysis?
Random walk analysis
Ratio analysis
Common size statement analysis
Trend series analysis

 

4. for the year 2005

net income 3k

dividends 1k

total assets 12/31/05 35k

total liabilities 12/31/05 21225

number of shares outstanding 1k

cost of equity 12%

Using the dividend discount model, assuming dividends grow at 10% per year for the next two years and at 5% thereafter, what is the value per share of Rivaz Corporation at 12/31/05?
$16.61
$16.51
$16.42
$14.87

5. You have been provided the following information about High Inc.
2005 2006
current assets 158K 163K
long term assets 453K 502K
current liabilities 102K 143K
long term liabilities 302K 348K
net income 32K 42K
Current Ratio for 2005 is:
1.55
1.51
1.50
1.14

6. How much would you be prepared to pay for a $500 bond which comes due in 5 years and pays $80 interest annually assuming your required rate of return is 8% (pick closest answer)?
$740
$660
$608
$500

7. You have been provided the following information about High Inc.
2005 2006
current assets 158K 163K
long term assets 453K 502K
current liabilities 102K 143K
long term liabilities 302K 348K
net income 32K 42K

Return on Common Equity for 2006 is:
15.46%
24.14%
16.79%
22.04%

8. Which of the following, if increased by 10%, results in a 10% higher stock price?
Dividend yield
Earnings yield
Net profit margin
None of the above

9. Which of the following statistics would be the most useful in determining the efficiency of a car rental company?
Inventory turnover
Number of employees per car rental
Average length of car rental
Number of days cars are rented as a percentage of number of days available for rent