d. The income statement gives us a picture of the fiem's financial position at a point in time e. The statement of cash flows tellis us how much cash the firm has in the form of currency and demand deposits 2. Which of the following would, generally, indicate deterioration in a company's financial position, holding other things constant? a. Asset turnover increases b. The EBITDA coverage ratio increases. c. The current and quick ratios both decline. 3. Under normal conditions, which of the following would be most likely to increase the coupon rate required to enable a bond to be issued at par? a. Adding a call provision. b. The rating agencies change the bond's rating from Baa to Aaa. eaking the bond a first mortgage bond rather than a debenture d. Adding a sinking fund. e. Adding additional restrictive covenants that limit management's actions. 4. Company XYZ's current return on equity is 12% which is above the security market line, which condition is true? a. XYZ is overvalued by the market. b. XYZ is undervalued by the market. c. Cannot be determined from the information provided. d. All of the above 5. In valuing a company using the dividend discount method, the proper discount rate for estimating the intrinsic value of its common stock is a. WACC b. The risk free rate of return. c. The return on equity implied by CAPM based on the beta of the company's stock returns. d. None of the above