Multiple-choice questions

1,Mark the true statement(s):

1. The ROA is positively influenced by high leverage of a company.
2. The ROE is positively influenced by high inventory turnover.
3. The ROA is positively influenced by high receivables turnover.
4. The ROE is negatively influenced by a high capital outlay that occur in the years the company acquires assets.

2,To calculate the Total Cash Flow to Enterprise in the indirect way starting from the Net Income, we need to

1. Subtract depreciation of fixed assets
2. Add the interest payments on the long term debt
3. Add the decrease in inventory.
4. Subtract the increase in accounts payable

3,The concept of a risk-averse investor suggests, that

1. A risk-averse investor preferably seeks investment in assets like junk bonds.
2. A risk-averse investor seeks higher and higher return for each additional unit of risk.
3. The relation between the risk and return of a risk-averse investor is a linear growing curve.

4,Mark the true statement(s) about Beta coefficient

1. The Beta coefficient is limited to values between -1 and 1.
2. The Beta represents the slope of the SML line.
3. If the Beta of a stock is 1 it means the investors do not percieve any systematic risk of the stock.
4. If the Beta of a stock is less than one it means in most times when the market portfolio returns are going up the stock returns are going down.
5. If the Beta of a stock is 0 the investors to this stock require a rate of return close to the rate of return of government treasury bonds.