1. During 2016, Energy Corp. fully impaired a generation facility that represented 5% of its total assets (i.e., reported an impairment loss and reduced the book value of the asset). What will be the effect of this impairment on Energy's asset turnover (using the average balance in the balance sheet) and operating profit margin in 2016 ? A. Asset turnover will decrease and net income margin will decrease. B. Asset turnover will increase and net income margin will increase. C. Asset turnover will decrease and net income margin will increase. D. Asset turnover will increase and net income margin will decrease. 2. How would you expect the ratios to differ between a discount supermarket and luxury retailer? A. Discount supermarket would have a lower gross margin B. Discount supermarket would have a higher SGA margin C. Discount supermarket would have lower inventory turnover D. Discount supermarket would have lower ROE 3. A firm has a higher asset turnover ratio than the industry average, which implies A. the firm has a higher P/E ratio than other firms in the industry. B. the firm has higher spending on new fixed assets than other firms in the industry. C. the firm is more profitable than other firms in the industry. D. the firm is utilizing assets more efficiently than other firms in the industry 4. A firm has a P/B ratio that equals the industry average and its ROCE is lower than the industry average, which implies A. The firm has a higher P/E ratio than average firms in the industry B. The firm has a lower P/E ratio than average firms in the industry. C. The firm has the same P/E ratio as average firms in the industry. D. The P/E ratio cannot be determined. 5. Consider the following two potential transactions: (i) borrow from a bank; and (ii) use the proceeds from borrowing to pay out dividend. Assume this is an NFA firm. The combination of two financial transactions will A. reduce the financial leverage (FLEV) and the firm will continue to be an NFA firm. B. reduce the financial leverage (FLEV) and the firm will switch to an NFO firm. C. increase the financial leverage (FLEV) and the firm may become be an NFO firm. D. increase the financial leverage (FLEV) and the firm cannot be an NFA firm anymore