23. If a firm is not retaining most of their earnings this suggests that they are: a. A stable company b. A growing company C. A company that is experiencing a decrease in demand for their product d. Being poorly managed 24. Why are retained earnings important? a. They represent cash available to be distributed to shareholders b. They represent amounts that were reinvested in a company on behalf of its owners C. They represent income the owners received in the form of dividends d. They give investors an idea of how profitable a company is because they represent earnings that were not paid out in the last period 25. A debt/equity ratio of 8.1 means: a. The firm is financing the company with 81% borrowed funds b. The firm has 81 times more equity than debt C. Debt is turning over 8.1 times a year d. The firm has 8.1 times more debt than equity 26. A net profit margin of 3.75% means: a. For every dollar of sales, income of $3.75 is generated b. For every dollar of sales, income of $0.0376 is generated C. For every dollar of equity, income of $0.0376 is generated d. For every dollar of assets, income of $3.75 is generated 27. Times Interest Earned is best described by: a. How much income is generated by debt b. How many sales are generated by debt c. How much-operating income is available for every dollar of interest expense d. How much net profit is available for every dollar of interest expense 28. Net income is $100,000 and common stock dividends paid are $100,000 for the year. Retained earnings were $500,000 at the beginning of the year - The end of the year balance in retained earnings would be: a. $500,000 b. $300,000 C. $400,000 d. $600,000 29. If the stock market returned increases by 10% and an individual stock's return increases by 20% in response to the change in the stock market, beta for that particular stock will be a. Less than 1 b. Equal to 1 C. Greater than 1 d. Negative 30. Preferred stock is a difficult item to classify on the balance sheet because a. Preferred stockholders are paid dividends before common stockholders b. Preferred stock is sometimes subject to a call provision c. Preferred stockholders are part owners of the firm d. All of the above 31. Which of the following is a use of cash that would appear on the statement of cash flows? a. Increase in accumulated depreciation b. Purchase of marketable securities c. Receipt of interest income d. Decrease in accounts receivable 32. According to the article "Are Dow Transports a Dark Signal for the Economy" earnings of S&P500 companies have been declining, while P/E ratios have increased. This means that: a. The stock market is more vulnerable to unexpected economic weakness b. Investors have been willing to pay more dollar of earnings than they were before c. Both of the above statements are true d. Neither of the above statements are true because P/E ratios cannot increase if corporate profits are declining 33. In terms of risk, labor union disputes, entry of a new competitor, and embezzlement by management are all examples of factors affecting a. Diversifiable risk b. Market risk C. Systematic risk d. Company-specific risk that cannot be diversified away 34. What is the standard deviation of the following income statement sales protection given the following information? a. $169.26 b. $340 C. $387.50 d. $400 35. What is the coefficient of the following income statement sales protection given the following information? a. 1.41 b. .22 C. 12% d. 18.2x
