29 Jun Question 31. Dee’s has a fixed as
Question
31. Dee’s has a fixed asset turnover rate of 1.12 and a total asset turnover rate of 0.91. Sam’s has a fixed asset turnover rate of 1.15 and a total asset turnover rate of 0.88. Both companies have similar operations. Based on this information, Dee’s must be doing which one of the following?
A. utilizing its fixed assets more efficiently than Sam’s
B. utilizing its total assets more efficiently than Sam’s
C. generating $1 in sales for every $1.12 in net fixed assets
D. generating $1.12 in net income for every $1 in net fixed assets
E. maintaining the same level of current assets as Sam’s
32. Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.
A. asset management
B. long-term solvency
C. short-term solvency
D. profitability
E. turnover
33. If a firm produces a twelve percent return on assets and also a twelve percent return on equity, then the firm:
A. may have short-term, but not long-term debt.
B. is using its assets as efficiently as possible.
C. has no net working capital.
D. has a debt-equity ratio of 1.0.
E. has an equity multiplier of 1.0.
34. Which one of the following will decrease if a firm can decrease its operating costs, all else constant?
A. return on equity
B. return on assets
C. profit margin
D. equity multiplier
E. price-earnings ratio
35. Al’s has a price-earnings ratio of 18.5. Ben’s also has a price-earnings ratio of 18.5. Which one of the following statements must be true if Al’s has a higher PEG ratio than Ben’s?
A. Al’s has more net income than Ben’s.
B. Ben’s is increasing its earnings at a faster rate than the Al’s.
C. Al’s has a higher market value per share than does Ben’s.
D. Ben’s has a lower market-to-book ratio than Al’s.
E. Al’s has a higher net income than Ben’s.
36. Tobin’s Q relates the market value of a firm’s assets to which one of the following?
A. initial cost of creating the firm
B. current book value of the firm
C. average asset value of similar firms
D. average market value of similar firms
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