1 A company can always increase its Compound Leverage Factor with more use of debt. True. False. 2 The tax burden in the ROE decomposition is equal to 1- company's tax rate O company's tax rate - 1 O O when the company's does not have to pay any taxes 2 when the company's does not have to pay any taxes 3 A company in a 30% tax bracket will have a margin of 8% O 10% 16% 30% 4 The interest burden in the ROE decomposition is equal to O 1- company's debt interest rate O company's debt interest rate O 1 when the firm just makes enough operating income to pay interest expenses. OO when the firm just makes enough operating income to pay interest expenses. if its ROA is 16% and asset turnover is 2. 5 Which of the following is a good benchmark for financial ratio analysis? The most profitable company in the country. O The major competitor in the industry. The most profitable company in the state. The worst company in the industry. 6 A company has an EBIT of $100,000, an asset/equity ratio of 2.5, a tax rate of 40%, and an interest expense of $20,000. Its compound leverage factor is 0.5 01 7 The Asset Turnover of a company can be improved by O cutting operating expenses O investing more efficiently with its assets Oborrowing more debt cutting operating and interest expenses 2 2.5 8 National Furniture Company has an ROE of 11.9%, a debt/equity ratio of 2/3, a tax rate of 30%, and an interest rate on its debt of 12%. Its ROA is 12% 15% 20% 24% 9 A company's compound leverage ratio being less than one indicates problems in its debt management O inventory management O controlling operating expenses Ofixed asset management 10 Determine a company's ROE when its ROA is 20%, compound leverage factor 1.8, and tax rate 30%. O 11% 20% 25% 30% 11 What is the most correct relationship between a company's ROE and ROA when the company does not borrow any debt? OROE > ROA OROE ROA OROE