13.Which of the following statements is correct?

A.The use of debt in the capital structure results in tax benefits to the firm.

B.Debt is referred to as "financial leverage" because it magnifies returns to shareholders.

C.Debt management ratios evaluate whether a firm is financing its assets with a reasonable amount of debtversus equity financing.

D.All of these statements are correct.

E.None of the statements are correct

14.Sam's Saddleryhas asked you to help piece together financial information on the firm for the most current year. Managers give you the following information: sales = $20 million, total debt = $3 million, debt ratio = 75%, ROE = 37%. Using this information, what is the ROA for Sam's Saddlery?(Hint: Can you use the debt ratio to find the value of assets?)

A.6.75%

b.9.25%

C.11.8%

D.25.00%

E.27.00%

15.You are thinking of investing in Walter's Wheels,Inc. You have only the following information on the firm at year-end 2018: net income = $45,000, total debt = $1 million, and debt ratio = 70%. What is the ROE for Walter's Wheels in2018?

A.11.67%

B.10.50

C.9.25%

D.8.84%

E.7.14%

16.A corporation has a total asset turnover of 2 times, ROA of 13% and ROE of 16%. What is this firm's profit margin?

A.4.5%

B.5.0%

C.5.5%

D.6.0%

E.6.5%

17.A corporation has a total asset turnover of 2 times, ROA of 13% and ROE of 16%. What is this firm's debt ratio?

A.12.31%

B.13.50%

C.14.53%

D.16.72%;

E.18.75%

18.Which of the following statements is (are) correct?

A.Common-size financial statementsallow for an easy comparison of balance sheets and income statements across firms in the industry

.B.Common-size financial statementsare obtained by dividing all income statement accounts by net sales and all balance sheet accounts by total assets.

C.When financial ratios are compared to financial ratios from previous years, atime series is conducted.

D.All of theseare correct

.E.A and B, only

19.If a firm has 100,000 shares of common stock outstanding and has just recorded a $94,000 profit, what is its price/earnings ratio if its current share price is $36?

A.0.94

B.3.

.36.0

D.38.3

E.78.0

20.All of the following are problemswith cross-sectional financial analysis EXCEPT that

A.an industry may be dominated by a few firms.

B.annual reports sometimes do not disclose divisional financial data.

C.it provides no basis for comparison to other firms.

D.many firms are conglomerates

.E.Both A and B are problems