財(cái)務(wù)報(bào)表分析（英文版·第11版）測(cè)試題TestBank Chap008 Return on Invested Capital and Profitability Analysis

8-

Copyright?2014McGraw-HillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.

Chapter08

ReturnonInvestedCapitalandProfitabilityAnalysis

MultipleChoiceQuestions

1.

Whichofthefollowingratiosbestmeasurestheprofitabilityofacompany?

A.

Returnonequity

B.

Grossmargin

C.

Currentratio

D.

Netoperatingassetturnover

2.

Belowarethenetoperatingassetturnoversandnetoperatingprofitmarginsforcompaniesthatoperateinthreedifferentindustries(A,BandC).Theindustriesaregrocerystores,oilextractionanddrugindustry.

MatchtheindustrytoA,BorC

A.

OptionA

B.

OptionB

C.

OptionC

D.

OptionD

3.

Whichofthefollowingstatementsiscorrect?

A.

Netoperatingprofitmargindividedbynetoperatingassetturnoverequalsreturnonnetoperatingassets.

B.

Returnonnetoperatingassetscanbedisaggregatedintonetoperatingprofitmarginandleverage.

C.

Returnonequityequalsreturnonnetoperatingassetslessinterest,netoftax.

D.

Returnonequitycanbedisaggregatedintonetoperatingprofitmargin,netoperatingassetturnoverandleverage.

4.

Whichofthefollowingcouldexplainadecreaseinnetoperatingassetturnoverforacompany?

A.

Switchingfromstraightlinetoaccelerateddepreciationforfinancialreportingpurposes

B.

Anincreaseinthefinancialleverageofthecompany

C.

Additionofanewplantforproductionpurposes

D.

Decreasecostofproductioninputs

5.

ErrCompanyhasamajorlawsuitagainstthemforunsafeproducts.Itrecognizesahugeliabilityin2004of$300million.Theeffectofthisliabilityistodecreasestockholders'equityby50%.In2005,theeffectofrecognizingthisliability,allelseequal,is:

A.

returnonnetoperatingassetswillincreasedramatically.

B.

returnonnetoperatingassetswilldecreasedramatically.

C.

returnonequitywillincreasedramatically.

D.

returnonequitywilldecreasedramatically.

6.

Returnonoperatingassetsfor2005is:

A.

7.9%.

B.

7.41%.

C.

8.78%.

D.

8.1%.

7.

Returnoncommonequityfor2005is:

A.

11.42%.

B.

10.0%.

C.

11.0%.

D.

10.47%.

Assumeallassetsareoperatingassets;allcurrentliabilitiesareoperatingliabilities.

8.

Returnonnetoperatingassetsfor2006is:

A.

11.30%.

B.

12.03%.

C.

9.93%.

D.

11.19%.

9.

Returnonequityfor2006is:

A.

20.41%.

B.

19.75%.

C.

17.54%.

D.

18.12%.

10.

Whichofthefollowingcouldcausereturnonnetoperatingassetstoincrease,allotherthingsequal?

A.

Adecreaseininterestrateondebt

B.

Increaseindaysaccountsreceivableareoutstanding

C.

Increaseininventoryturnover

D.

Decreaseingrossmargin

11.

EysterCorporationreported$10millioninearningsandpaiddividendsof$3millionforfiscal2005.Returnonequityanddividendpayoutareexpectedtoremainconstantfortheforeseeablefuture.Netbookvalueattheendoffiscal2004was100million.Costofequityis10%.Usingtheresidualincomemethod,theintrinsicvalueofEyster'sstockattheendof2005shouldbe:

A.

$110million.

B.

$107million.

C.

$101million.

D.

notdeterminable.

12.

Whencalculatingreturnonnetoperatingassets,interestexpensenetoftaxisaddedbacktonetincomeforpurposesofcalculatingthenumerator.Whattaxrateshouldbeused?

A.

Estatetaxrate

B.

Marginaltaxrate

C.

Statutoryfederaltaxrate

D.

Statutoryfederaltaxrateplusstatutorystatetaxrate

BelowisselectedinformationfromTricrop.

13.

ReturnonnetoperatingassetsforYear1is:

A.

30.8%.

B.

16.3%.

C.

15.4%.

D.

14.5%.

14.

ReturnoncommonequityforYear1is:

A.

19.0%.

B.

19.60%.

C.

21.08%.

D.

26.03%.

15.

WhichofthefollowingiscorrectconcerningchangesatTricropfromYear1toYear2?

A.

OptionA

B.

OptionB

C.

OptionC

D.

OptionD

16.

Whichofthefollowingstatementsiscorrectconcerningchangesfromyear1toyear2atTricrop?

A.

Despitefavorablechangesinthetaxrate,returnonnetoperatingassetshasdecreased

B.

Despitefavorablechangesinnetoperatingassetutilization,returnonnetoperatingassetshasdecreased

C.

Largelybecauseoffavorablechangesintaxrates,returnonnetoperatingassetshasincreased

D.

Largelyduetofavorablechangesinleverage,returnonnetoperatingassetshasincreased

17.

Whichofthefollowingwillincreasethesustainableequitygrowthofacompany,allotherthingsequal?

A.

Increasedividendpayout

B.

Paysuppliersmorequickly

C.

Paysuppliersmoreslowly

D.

Decreasedividendpayout

18.

Whichofthefollowingwillcauseanincreaseinnetoperatingincome(NOPAT)?

A.

Increaseinthereturnonnetoperatingassets

B.

Decreaseinthereturnonnetoperatingassets

C.

Nochangeinthereturnonnetoperatingassets

D.

Thereisnotsufficientinformation

19.

Whichofthefollowingwouldexplainanobserveddecreaseinreturnonequity,allelseequal?

A.

Decreaseintaxrate

B.

Increaseininterestrateondebt

C.

Stocksplit

D.

Stockdividend

20.

Whichofthefollowingisthebestmeasureofoperatingefficiency?

A.

Returnonnetoperatingassets

B.

Returnonequity

C.

Returnonsales

D.

Returnoninventory

21.

Returnonoperatingassetsisameasureofwhichofthefollowing?

A.

Profitability

B.

Efficiency

C.

Solvency

D.

Liquidity

ThefollowinginformationrelatestoYutterCorporation:

22.

WhatisYutter'ssustainableequitygrowthrate?

A.

9.12%

B.

9.88%

C.

11.4%

D.

12.0%

23.

WhatisthevalueofYutter'sstockattheendofYear1usingthedividenddiscountmodelassumingthatthedividendpayoutratioremainsconstantandYuttergrowsatitssustainableequitygrowthrate?

A.

$83,333

B.

$157,642

C.

$500,000

D.

$557,000

24.

IfYutter'sdividendpayoutratioincreasedto50%afteryear1then:

A.

thesustainableequitygrowthratewouldincrease.

B.

thereturnonequitywoulddecrease.

C.

thevalueofthestockwoulddecrease.

D.

thereturnonnetoperatingassetswoulddecrease.

25.

Costofgoodssolddividedbyinventoryprovidesinformationabout:

A.

profitability.

B.

capitalstructure.

C.

managementofworkingcapital.

D.

grossprofitmargin.

26.

Whenconsideringthedifferencebetweenreturnonnetoperatingassets(RNOA)andreturnoncommonshareholders'equity(ROCE),whichofthefollowingstatementsisincorrect?

A.

PreferreddividendsaredeductedfromthenumeratorwhencalculatingROCEbutnotwhencalculatingRNOA.

B.

RNOAisapre-interestmeasurebutROCEisnot.

C.

RNOAisapost-interestmeasurebutROCEisnot.

D.

RNOAisindependentoftheformoffinancingbutROCEisnot.

27.

Purchasesdividedbyaccountspayableprovidesinformationabout:

A.

capitalstructure.

B.

managementofworkingcapital.

C.

grossprofitmargin.

D.

profitability.

WidgetCo.andToolsInc.bothoperateinthesameindustry.Theyarecapital-intensivecompaniesproducingwidgets.Belowareselecteddata:

28.

Whichofthefollowingstatementsisthemostplausibleexplanationofthedifferenceinobservednetoperatingprofitmargins?

A.

WidgetCo'slowerfinancialleverage

B.

WidgetCousesLIFOandToolsusesFIFO

C.

WidgetCo'slowertaxrate

D.

WidgetCo'snetoperatingassetturnover

29.

Whichofthefollowingstatementsbestexplainsthedifferenceinobservednetoperatingassetturnover?

A.

WidgetCo'slowerfinancialleverage

B.

WidgetCousesFIFOandToolsusesLIFO

C.

WidgetCo'slowertaxrate

D.

WidgetCohassignificantoperatingleasesandToolInc.hasnoleases

30.

Whichofthefollowingstatementsiscorrect?

A.

WidgethashigherRNOAthanTools.

B.

WidgethaslowerRNOAthanTools.

C.

WidgethassameRNOAasTools.

D.

InsufficientinformationtocalculateRNOA.

31.

Whichofthefollowingstatementscouldexplainthedifferenceinobservedtaxrates?

A.

Widgetusesstraight-linedepreciationandToolusesMACRS.

B.

WidgetusesLIFOandToolusesFIFO.

C.

Toolhasforeignsubsidiariesincountrieswithmuchlowertaxrates.

D.

Widgethassignificantamountsofinterestincomefrommunicipalbonds.

32.

WidgethasahigherEBIT/RevenuebutlowernetoperatingprofitmarginthanTool.Whichofthefollowingstatementscouldexplainthisbetterasapercentageofsales?

A.

Widgethasgreaterinterestexpenseandtaxes.

B.

Widgethasgreaterinterestexpensebutlowertaxes.

C.

Widgethaslowerinterestexpensebuthighertaxes.

D.

Widgethaslowerinterestexpenseandtaxes.

33.

WhichofthefollowingstatementsabouttherelationshipbetweenRNOAandROCEiscorrect?

A.

ROCEisalwaysgreaterthanRNOA

B.

ROCEisgreaterthanRNOA,ifRNOAisgreaterthanafter-taxcostofdividends

C.

ROCEisgreaterthanRNOA,ifRNOAisgreaterthancostofdebt

D.

ROCEisgreaterthanRNOA,ifRNOAisgreaterthanafter-taxcostofdebt

34.

Whichofthefollowingstatementsabouttheequitygrowthrateiscorrect?

I.ThehighertheROCEthehigherequitygrowthrate,allotherthingsequal.

II.Thehigherthedividendpayoutthehighertheequitygrowthrate.

III.Theequitygrowthrateisunaffectedbythecostofdebt.

IV.Theequitygrowthrateindicatestheexpectedgrowthinstockpriceeachperiod.

A.

I,II,III,andIV

B.

I,II,andIII

C.

IandIII

D.

Ionly

35.

Whichofthefollowingstatementsaboutthereturnonshareholders'investment(ROSI)iscorrect?

A.

Ifbookvalueofequityislessthanmarketvalue,ROSIisgreaterthanROCE.

B.

ROSIwillbehigherthegreaterthedividendpayoutratio.

C.

ROSIislikelytobemorevolatilethanROCE.

D.

ROSInormallyequalsROCE.

36.

Whichofthefollowingsituationsismostlikelytoexplainanaccountsreceivableturnoverthatislowerthantheindustrynorm?

A.

Thecompanymakeslesscreditsalesthanindustry.

B.

Thecompanygivescustomerslesstimetopaythanitscompetitors.

C.

Thecompanyhasbeensellinginferiorproductstocompetitors.

D.

Thecompanyissystematicallyunder-estimatingbaddebts.

37.

Whichofthefollowingsituationsismostlikelytoexplainanetoperatingassetturnoverthatishigherthantheindustrynorm?

A.

Thecompanyhasmorerecentlypurchasedfixedassets.

B.

ThecompanyusesFIFOwhilecompetitorsuseLIFO.

C.

Thecompanyusestheaccelerateddepreciationmethodwhilecompetitorsusethestraightlinemethod.

D.

Thecompanypurchasesmorecreditsuppliesthancompetitors.

SelectedinformationforAcmeCorp.:

38.

WhencalculatingAcme'sreturnonnetoperatingassetsinYear1,whichofthefollowingadjustmentstotheassetbaseismostappropriatetoconsider?

A.

Accumulateddepreciationadjustment

B.

Intangibleassetadjustment

C.

Non-operatingassetadjustment

D.

Noassetadjustment

39.

WhencalculatingAcme'sreturnonnetoperatingassetsinYear2,whichofthefollowingadjustmentstotheassetbaseismostappropriatetoconsider?

A.

Accumulateddepreciationadjustment

B.

Tangibleassetadjustment

C.

Non-operatingassetadjustment

D.

Noassetadjustment

40.

WhencalculatingAcme'sreturnonnetoperatingassetsinYear3,whichofthefollowingadjustmentstotheassetbaseismostappropriatetoconsider?

A.

Accumulateddepreciationadjustment

B.

Intangibleassetadjustment

C.

Operatingassetadjustment

D.

Noassetadjustment

True/FalseQuestions

41.

Ananalysisofacompany'sperformancerequiresjointanalysisofnetincomeinrelationtotheinvestedcapital.

True

False

42.

Thereisonlyonewaytomeasureinvestedcapital.

True

False

43.

Acompanythatoperatesinahighlycompetitiveindustrywithlowbarrierstoentryislikelytohavelownetoperatingprofitmarginscomparedtocompaniesthatoperateinlesscompetitiveindustries.

True

False

44.

Companiesthathavelownetoperatingprofitmarginsgenerallyonlyearnareasonablereturnonnetoperatingassetsiftheycanutilizetheirnetoperatingassetsveryefficiently.

True

False

45.

ThetwocomponentsofRNOA,netoperatingprofitmarginandNOAturnover,areindependentofeachother.

True

False

46.

Ifacompanyhasrapidlygrowingearningspershare,theirreturnonnetoperatingassetsmustbeincreasingtoo.

True

False

47.

Whencalculatingreturnonequityminority,interestisaddedtothenumeratorasithasbeendeductedinarrivingatnetincome.

True

False

48.

Whencalculatingreturnonnetoperatingassets,deferredtaxesshouldbedeductedfromthedenominator.

True

False

49.

Returnonequityisthereturnstockholdershaverealizedduringthepastyear.

True

False

50.

Therelationbetweenacompany'sreturnoncommonequity(ROCE)andreturnonnetoperatingassets(RNOA)revealsinformationaboutthecompany'ssuccesswithfinancialleverage.

True

False

51.

Adecreaseinnetoperatingprofitmarginwillcausebothreturnonnetoperatingassetsandreturnonequitytodecrease,allotherthingsbeingequal.

True

False

52.

Returnonnetoperatingassetswillalwaysbegreaterthanorequaltothepretaxreturnonequity.

True

False

53.

Whencalculatingreturnontotalequity,itisnormaltoaddbackpreferreddividendstonetincome.

True

False

54.

Itispossibletohaveanincreasingreturnonnetoperatingassetswhilenetoperatingprofitmarginisdecreasing.

True

False

55.

Returnoninvestedcapitalisabettermeasureofprofitabilitythanearningsasearningsnumbersfailtoreflectthecapitalneededtogeneratethoseearnings.

True

False

56.

Iftwocompaniesbothincreasetheirnetincomeby25%overtheprioryearthismeanstheyhavebothbeenequallyprofitablethisyear.

True

False

57.

Whencalculatingreturnonnetoperatingassetsitmaybenecessarytoadjustassetstoreflectthefactthatnotallassetsareoperatingassets.

True

False

58.

Iffutureexpectedreturnoncommonstockholders'equityislessthanexpectedrequiredreturnbyequityholdersthenthemarketvalueofacompany'sstockshouldbelessthanbookvalue.

True

False

59.

Sustainableequitygrowthrateisafunctionofreturnoncommonstockholders'equityandthedividendpayoutratio.

True

False

60.

Returnonequitycanbeexpressedasreturnonnetoperatingassetsmultipliedbyleverage(netoperatingassets/equity)andbyearningsleverage.

True

False

61.

Theaccounting-basedstockvaluationformulacalculatesthevalueofastockasthebookvalueofthenetoperatingassetsplusthepresentvalueoffutureexpecteddividendsdiscountedatthecostofequity.

True

False

62.

Whencalculatingreturnonnetoperatingassets,thenumeratorisnetincomeplusminorityinterest.

True

False

63.

Returnonnetoperatingassetsisabettermeasureofoperatingperformancethanreturnonequity,asitisindependentoftheformoffinancing.

True

False

64.

Itispossibletohaveincreasingearningsgrowthwhilehavingdecreasingreturnonnetoperatingassets.

True

False

65.

Itispossibletoassessthecommonequitygrowthratebyanalyzingtheretentionofearnings.

True

False

66.

Anadvantageofleveragethatbenefitscommonstockholdersissuccessfultradingontheequity.

True

False

67.

Financialstatementsofadiversifiedcompanyshouldbeanalyzedbysegments.

True

False

68.

Practiceconsidersasegmentsignificantifitssales,operatingincome(orloss),oridentifiableassetsare30%ormoreofthecombinedamountsofallthecompany'soperatingassets.

True

False

EssayQuestions

69.

ReturnonEquity

a.Calculatereturnoncommonequity(ROCE)forfiscalX4andX7.Identify,asfarasallowedbythedata,componentsdrivinganychangesinROCEfromX4toX7.(IfyouwanttogivestudentsmoreguidancethenasktodisaggregateROCEintonetoperatingprofitmargin,netoperatingassetturnoverandleverage.)

b.CompareandcontrastthechangeinearningspersharetoROCEoverthistimeperiod.

70.

ROCEandEPSCalculationandInterpretation

YouaregiventhefollowingdataforGoodCompanyInc.for2004,2005,and2006(amountsinthousands).

a.CalculateROCEforthethreeyears.

b.CalculatebasicEPSforthethreeyears.

c.InterpretyourfindingsforbothROCEandEPS.

71.

EffectofTransactions

Indicatetheeffectofthefollowingtransactionson:

i.Returnonnetoperatingassets(RNOA)

ii.Returnoncommonshareholders'equity(ROCE)

iii.Earningspershare(basic)

Considereachtransactionindependentlyandexplainyouranswer.AssumethatROCEishigherthanRNOA.

1.Companyissuesmorepreferredstockandusesproceedstoreduceaccountspayable.

2.Companyhasastocksplit.

3.Companyconvertstojust-in-timeinventorysystem(JIT).Thisallowsthemtoholdhalfthelevelsofinventoryforthesameamountofsales(salesthemselvesarenotincreasedbythischangetoJIT).

72.

Financing

a.NiglowCorporationproducesmetalcastings.Inthepastyearitearneda10%returnonitsnetoperatingassetsbaseof$10million.Niglowneeds$10milliontoexpanditsoperations,andhastheoptionofobtainingnone,some,oralloftheproceedsfromthebank.Currentlythecompanyisallequityfinanced.Itexpectstobeabletomaintainitsreturnonnetoperatingassetsaftertheexpansion.Thebankhasindicatedthattheamountitwillchargeontheloanwillbedependentupontheresultantdebt/equityratio.Specifically,therateswillbe8%,9%,10%,and12%fordebt-to-equityratioslessthanorequalto0.25,0.5,1.0,andover1.0,respectively.Niglow'staxrateis40%.

b.CalculateNiglow'sreturnoncommonequityiftheexpansionisfinanced:

i.usingallequity

ii.50%debt,50%equity

iii.alldebt

c.WhatwouldNiglow'sreturnonnetoperatingassetsneedtobeforthereturnonequitytobedecreasedbyfinancingtheexpansionusingalldebt?

73.

Ratios

BelowareselectedratiosforManufacturersCorporation.Usethisinformationanswerthefollowingquestions.

a.Calculatereturnonnetoperatingassetsforallthreeyears.Identifyreasonsforanychanges.

b.Calculatereturnonequityforallthreeyears.Commentonchanges.

74.

ReturnonNetOperatingAssets

Whencalculatingreturnonnetoperatingassetsanalystssometimesmakeadjustmentstothenetoperatingassetbaseusedinthedenominatorortheratio.Threepossibleadjustmentsarelistedbelow.Explainwhattheseadjustmentsare,anddiscussthemeritsoftheseadjustments.

1.Non-operatingassetadjustment

2.Intangibleassetadjustment

3.Accumulateddepreciationadjustment

75.

FactorsAffectingReturnonCapital

YouarecomparingtheReturnonCommonEquity(ROCE)anditscomponents(netoperatingprofitmargin,netoperatingassetturnoverandleverage)oftwocompaniesinthesameindustry,ABCCorpandXYZCorporation.ExplainhoweachofthefollowingwillaffectofROCEanditscomponentsofABCrelativetoXYZ,allotherthingsequal.

1.ABCCorporationis100%equityfinanced,whereasXYZhasasignificantamountofdebtfinancing.

2.ABCissuedstockdividendduringyear,andXYZdidnot.

3.ABCusesFIFOandXYZusesLIFO(assumingnormaleconomicconditions)

4.ABCsoldreceivablesatfacevalueattheendoftheyear.

76.

ROCEandComponents

BelowareselectedratiosforWidgetCorporationandToolsInc.Usethisinformationtoanswerthefollowingquestions.

a.Whichcompanyhasahigherreturnonequity?

b.Weknowfromtheresidualincomemethodofvaluationthat,allotherthingsequal,thecompanywiththehigherROCEwillhaveahigherintrinsicvalue.Whyareallotherthingsnotlikelytobeequalinthisinstance(hint:lookatcomponentsofROCE)?

c.Whichcompanyhasbetteroperatingperformance(thatis,ignoringcapitalstructure).

Chapter08ReturnonInvestedCapitalandProfitabilityAnalysisAnswerKey

MultipleChoiceQuestions

1.

Whichofthefollowingratiosbestmeasurestheprofitabilityofacompany?

A.

Returnonequity

B.

Grossmargin

C.

Currentratio

D.

Netoperatingassetturnover

2.

Belowarethenetoperatingassetturnoversandnetoperatingprofitmarginsforcompaniesthatoperateinthreedifferentindustries(A,BandC).Theindustriesaregrocerystores,oilextractionanddrugindustry.

MatchtheindustrytoA,BorC

A.

OptionA

B.

OptionB

C.

OptionC

D.

OptionD

3.

Whichofthefollowingstatementsiscorrect?

A.

Netoperatingprofitmargindividedbynetoperatingassetturnoverequalsreturnonnetoperatingassets.

B.

Returnonnetoperatingassetscanbedisaggregatedintonetoperatingprofitmarginandleverage.

C.

Returnonequityequalsreturnonnetoperatingassetslessinterest,netoftax.

D.

Returnonequitycanbedisaggregatedintonetoperatingprofitmargin,netoperatingassetturnoverandleverage.

4.

Whichofthefollowingcouldexplainadecreaseinnetoperatingassetturnoverforacompany?

A.

Switchingfromstraightlinetoaccelerateddepreciationforfinancialreportingpurposes

B.

Anincreaseinthefinancialleverageofthecompany

C.

Additionofanewplantforproductionpurposes

D.

Decreasecostofproductioninputs

5.

ErrCompanyhasamajorlawsuitagainstthemforunsafeproducts.Itrecognizesahugeliabilityin2004of$300million.Theeffectofthisliabilityistodecreasestockholders'equityby50%.In2005,theeffectofrecognizingthisliability,allelseequal,is:

A.

returnonnetoperatingassetswillincreasedramatically.

B.

returnonnetoperatingassetswilldecreasedramatically.

C.

returnonequitywillincreasedramatically.

D.

returnonequitywilldecreasedramatically.

6.

Returnonoperatingassetsfor2005is:

A.

7.9%.

B.

7.41%.

C.

8.78%.

D.

8.1%.

7.

Returnoncommonequityfor2005is:

A.

11.42%.

B.

10.0%.

C.

11.0%.

D.

10.47%.

Assumeallassetsareoperatingassets;allcurrentliabilitiesareoperatingliabilities.

8.

Returnonnetoperatingassetsfor2006is:

A.

11.30%.

B.

12.03%.

C.

9.93%.

D.

11.19%.

9.

Returnonequityfor2006is:

A.

20.41%.

B.

19.75%.

C.

17.54%.

D.

18.12%.

10.

Whichofthefollowingcouldcausereturnonnetoperatingassetstoincrease,allotherthingsequal?

A.

Adecreaseininterestrateondebt

B.

Increaseindaysaccountsreceivableareoutstanding

C.

Increaseininventoryturnover

D.

Decreaseingrossmargin

11.

EysterCorporationreported$10millioninearningsandpaiddividendsof$3millionforfiscal2005.Returnonequityanddividendpayoutareexpectedtoremainconstantfortheforeseeablefuture.Netbookvalueattheendoffiscal2004was100million.Costofequityis10%.Usingtheresidualincomemethod,theintrinsicvalueofEyster'sstockattheendof2005shouldbe:

A.

$110million.

B.

$107million.

C.

$101million.

D.

notdeterminable.

12.

Whencalculatingreturnonnetoperatingassets,interestexpensenetoftaxisaddedbacktonetincomeforpurposesofcalculatingthenumerator.Whattaxrateshouldbeused?

A.

Estatetaxrate

B.

Marginaltaxrate

C.

Statutoryfederaltaxrate

D.

Statutoryfederaltaxrateplusstatutorystatetaxrate

BelowisselectedinformationfromTricrop.

13.

ReturnonnetoperatingassetsforYear1is:

A.

30.8%.

B.

16.3%.

C.

15.4%.

D.

14.5%.

14.

ReturnoncommonequityforYear1is:

A.

19.0%.

B.

19.60%.

C.

21.08%.

D.

26.03%.

15.

WhichofthefollowingiscorrectconcerningchangesatTricropfromYear1toYear2?

A.

OptionA

B.

OptionB

C.

OptionC

D.

OptionD

16.

Whichofthefollowingstatementsiscorrectconcerningchangesfromyear1toyear2atTricrop?

A.

Despitefavorablechangesinthetaxrate,returnonnetoperatingassetshasdecreased

B.

Despitefavorablechangesinnetoperatingassetutilization,returnonnetoperatingassetshasdecreased

C.

Largelybecauseoffavorablechangesintaxrates,returnonnetoperatingassetshasincreased

D.

Largelyduetofavorablechangesinleverage,returnonnetoperatingassetshasincreased

17.

Whichofthefollowingwillincreasethesustainableequitygrowthofacompany,allotherthingsequal?

A.

Increasedividendpayout

B.

Paysuppliersmorequickly

C.

Paysuppliersmoreslowly

D.

Decreasedividendpayout

18.

Whichofthefollowingwillcauseanincreaseinnetoperatingincome(NOPAT)?

A.

Increaseinthereturnonnetoperatingassets

B.

Decreaseinthereturnonnetoperatingassets

C.

Nochangeinthereturnonnetoperatingassets

D.

Thereisnotsufficientinformation

19.

Whichofthefollowingwouldexplainanobserveddecreaseinreturnonequity,allelseequal?

A.

Decreaseintaxrate

B.

Increaseininterestrateondebt

C.

Stocksplit

D.

Stockdividend

20.

Whichofthefollowingisthebestmeasureofoperatingefficiency?

A.

Returnonnetoperatingassets

B.

Returnonequity

C.

Returnonsales

D.

Returnoninventory

21.

Returnonoperatingassetsisameasureofwhichofthefollowing?

A.

Profitability

B.

Efficiency

C.

Solvency

D.

Liquidity

ThefollowinginformationrelatestoYutterCorporation:

22.

WhatisYutter'ssustainableequitygrowthrate?

A.

9.12%

B.

9.88%

C.

11.4%

D.

12.0%

23.

WhatisthevalueofYutter'sstockattheendofYear1usingthedividenddiscountmodelassumingthatthedividendpayoutratioremainsconstantandYuttergrowsatitssustainableequitygrowthrate?

A.

$83,333

B.

$157,642

C.

$500,000

D.

$557,000

24.

IfYutter'sdividendpayoutratioincreasedto50%afteryear1then:

A.

thesustainableequitygrowthratewouldincrease.

B.