Question 15

1. A firm has a profit margin of 4%, a total asset turnover of 2x and a debt ratio of 50%. The firm's ROA=____ and the firm's ROE=_____.

   		2%, 4%
   		8%, 12%
   		4%, 12%
   		8%, 16%

4 points

Question 16

1. Suppose a corporation issues $1,000,000 of new common stock and uses the money raised to repurchase (retire) some of their outstanding corporate bonds that have a coupon interest rate of 10%. The firm's total assets, sales and EBIT are unchanged. Which of the following will occur? 1. The firm's ROA will decrease; 2. The firm's TIE will decrease; 3. The firm's nPM will increase

   		1 only
   		2 only
   		3 only
   		1 and 2 only
   		1 and 3 only

4 points

Question 17

1. Which of the following must be correct? Remember that BEP=EBIT/TA

   		If a firm's BEP is 5% then their ROA is 5%.
   		If a firm's ROA is 5% then their ROE is 5%.
   		If a firm has no debt then their BEP is equal to their ROA.
   		If a firm has no debt and pays no taxes then their BEP is equal to their ROA.

4 points

Question 18

1. Which of the following statements is correct?

   		Balance sheet numbers reflect current market values.
   		Depreciation and interest are both non-cash expenses.
   		Depreciation and interest are both tax-deductible expenses.
   		Net fixed assets will always be greater than gross fixed assets.