1. Continuing with the RJR situation - an LBO means that the take-over company borrows an enormous amount of money (often by issuing speculative, or "junk" bonds) and uses those borrowed funds to buy-back the common stock. After the take-over, which of the following ratios would be the best indicator that this has happened::

   a.	Quick Ratio
   b.	ACP, Average collection period
   c.	TIE, Times Interest Earned
   d.	Net profit margin

4 points

Question 5

1. The common stock in the Smyrna Gold Mine Company, their slogan" "If you can find it in Smyrna, heck you can find it anywhere!", is considered to be twice as volitile as the "average stock".. This being the case, you would expect the beta on Smyrna's stock to be:

   a.	1
   b.	2
   c.	200
   d.	0.5

4 points

Question 6

1. 1. Managing the firm's assets includes all of the following except:

   a.	Computer systems
   b.	par value of common stock
   c.	marketable securities
   d.	raw material inventory

4 points

Question 7

1. If I wanted to avoid the potential issue of "double taxation of profits" I should avoid setting up my company as a:

   a.	sole proprietorship
   b.	corporation
   c.	partnership
   d.	all of the above are potentially liable to "double taxation"

4 points

Question 8