2.

ROE = profit margin total asset turnover equity multiplier is referred to as the _________________.

A. equity identity

B. equity performance identity

C. Du Pont identity

D. profitability determinant identity

E. SIC identity

3.

The sustainable growth rate of a firm is

I. calculated as (ROE x b )/(1 - ROE x b)

II. calculated as (ROA x b)/(1 - ROA x b)

III. maximum growth rate achievable with unlimited debt financing.

IV. defined as maximum growth rate achievable excluding external financing of any kind.

V. defined as the maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.

A. I and V only

B. III and IV only

C. III and V only

D. I only

E. I and IV only

4. In our calculation of cash flow from assets, we need to consider the balance(s) of

A. inventory

B. none of them is included

C. accounts payable

D. sales

E. all are included

5. Which of the following is/are needed to determine the amount of fixed assets required to support each dollar of sales? I. current amount of current assets II. current sales III. current level of current liabilities IV. current payout raio

A. II and III only

B. II, III, and IV only

C. II only

D. I, II, III, and IV

E. III only

6. By looking at the ________ of a firm, we should have some ideas of how much assets the firm needs in order to generate $1 in sales.

A. payout ratio

B. retention ratio

C. current ratio

D. equity multiplier

E. capital intensity ratio