Financial Management - Study Mode

[#331] Profit margin = 4.5%, assets turnover = 2.2 times, equity multiplier = 2.7 times then return on equity will be
Correct Answer

(A) 26.73%

Explanation

Solution: Return on Equity (ROE) = Net Profit Margin x Asset Turnover Ratio x Equity Multiplier. = 4.5% x 2.2 x 2.7 = 26.73%

[#332] Formula such as net income available for common stockholders divided by total assets is used to calculate
Correct Answer

(A) return on total assets

Explanation

Solution: Formula such as net income available for common stockholders divided by total assets is used to calculate return on total assets. The ratio is considered to be an indicator of how effectively a company is using its assets to generate earnings.

[#333] Price per ratio is divided by cash flow per share ratio which is used for calculating
Correct Answer

(D) price to cash flow ratio

Explanation

Solution: Price per ratio is divided by cash flow per share ratio which is used for calculating price to cash flow ratio. The price-to-cash flow (P/CF) ratio is a stock valuation indicator or multiple that measures the value of a stock's price relative to its operating cash flow per share.

[#334] A techniques uses to identify financial statements trends are included
Correct Answer

(D) Both A and B

Explanation

Solution: A techniques uses to identify financial statements trends are included in common size analysis and percent change analysis.

[#335] Net income available to stockholders is Rs 150 and total assets are Rs 2,100 then return on total assets would be
Correct Answer

(B) 7.14%

Explanation

Solution: Net income available to stockholders = 150 Total assets = 2100 Return on common equity rate shows the net income earned per every rupee invested.It acts as a yardstick of profitability. Return on common equity = (net income - preferential stock)/Average common stock holder's equity No further information is available = (150/2100)×100 = 7.14%