Financial Management - Study Mode

[#81] Price per share divided by earnings per share is formula for calculating
Correct Answer

(A) price earning ratio

[#82] Profit margin multiply assets turnover multiply equity multiplier is used to calculate
Correct Answer

(D) return on equity

Explanation

Solution: Profit margin multiply assets turnover multiply equity multiplier is used to calculate return on equity. Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity.

[#83] Company low earning power and high interest cost cause financial changes which have
Correct Answer

(B) high return on assets

Explanation

Solution: Company low earning power and high interest cost cause financial changes which have high return on assets. The higher the ROA number, the better, because the company is earning more money on less investment.

[#84] Ratios which relate firm's stock to its book value per share, cash flow and earnings are classified as
Correct Answer

(B) market value ratios

Explanation

Solution: Ratios which relate firm's stock to its book value per share, cash flow and earnings are classified as market value ratios. Market value ratios are used to evaluate the current share price of a publicly-held company's stock.

[#85] An equation in which total assets are multiplied to profit margin is classified as
Correct Answer

(A) du DuPont equation

Explanation

Solution: An equation in which total assets are multiplied to profit margin is classified as du DuPont equation. In the DuPont equation, ROE is equal to profit margin multiplied by asset turnover multiplied by financial leverage. Under DuPont analysis, return on equity is equal to the profit margin multiplied by asset turnover multiplied by financial leverage.