Question 4

1. A firm's ROE will be equal to their ROA if

   		the firm uses no equity financing
   		the firm uses only equity financing
   		a firm's ROE will never equal their ROE
   		a firm's ROE will always equal their ROE

4 points

Question 5

1. Firms A, B and C all show a large increase in the cash account on their balance sheet from 2006 to 2007. Which firm would you prefer to invest in, assuming that you are a long-term investor?

   		Firm A which generated the cash by a large positive cash flow from operating activities.
   		Firm B which generated the cash by a large positive cash flow from investing activities
   		Firm C which generated the cash by a large positive cash flow from financing activities

4 points

Question 6

1. Which of the following is a source of externally generated equity financing?

   		issuing new corporate bonds
   		issuing new shares of common stock
   		retained earnings
   		bank loans
   		collecting all of their outstanding accounts receivable