13) Exhibit 4.1 The balance sheet and income statement shown below are for Gray Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $) Assets 2021

Cash and securities $3,000

Accounts receivable 15,000

Inventories 18,000

Total current assets $36,000

Net plant and equipment $24,000

Total assets $60,000

Liabilities and Equity Accounts payable $17,160

Accruals 9,240

Notes payable 6,000

Total current liabilities $32,400

Long-term bonds $12,000

Total liabilities $44,400

Common stock $3,900

Retained earnings 11,700

Total common equity $15,600

Total liabilities and equity $60,000

Income Statement (Millions of $) 2021 Net sales $66,000

Operating costs except depreciation 61,380

Depreciation 1,320

Earnings before interest and taxes (EBIT) $3,300

Less interest 1,080

Earnings before taxes (EBT) $2,220

Taxes (25%) 555

Net income $1,665

Other data: Shares outstanding (millions) 500.00

Common dividends (millions of $) $582.75

Int. rate on notes payable & L-T bonds 6%

Federal plus state income tax rate 25%

Year-end stock price $39.96

Refer to Exhibit 4.1. What is the firm's ROE? Do not round your intermediate calculations. Group of answer choices

a)10.67% b)9.61% c)11.42% d)9.82% e)11.85%

14) Which of the following statements is CORRECT? Group of answer choices

A)Proprietorships and partnerships generally have a tax advantage over corporations. B)Proprietorships are subject to more regulations than corporations. C)In any partnership, every partner has the same rights, privileges, and liability exposure as every other partner. D)Corporations of all types are subject to the corporate income tax. E)One of the disadvantages of incorporating your business is that you could become subject to the firm's liabilities in the event of bankruptcy.

15) Wu Systems has the following balance sheet. Assume that all current assets are used in operations. How much net operating working capital does the firm have? Cash $ 100 Accounts payable $ 200 Accounts receivable 650 Accruals 290 Inventory 550 Notes payable 410 Current assets $ 1,300 Total current liabilities $ 900 Net fixed assets $ 1,000 Long-term bonds 600 Total liabilities $ 1,500 Common stock 300 Retained earnings 500 Common equity $ 800 Total assets $ 2,300 Total liab. & equity $ 2,300

Group of answer choices

a)$713 b)$810 c)$761 d)$915 e)$988

16) On the balance sheet, total assets must always equal the sum of total liabilities and equity. Group of answer choices

True

False

17) Other things held constant, the more debt a firm uses, the lower the firm's return on total assets will be. Group of answer choices

True

False

18) The current and quick ratios help us measure a firm's liquidity. The current ratio measures the relationship of the firm's current assets to its current liabilities, while the quick ratio measures the firm's ability to pay off short-term obligations without relying on the sale of inventories. Group of answer choices

True

False