Question 1

Match the ratio that goes with each formula.
-$\frac{\text { Net Income - Preferred Dividends }}{\text { Weighted Average Number of Common}}$
Shares Outstanding

Accepted Answer

A) degree of financial leverage 
B) basic earnings per common share 
C) price/earnings ratio 
D) percentage of earnings retained 
E) dividend payout
F)dividend yield
G)book value per share 
A) degree of financial leverage 
B) basic earnings per common share 
C) price/earnings ratio 
D) percentage of earnings retained 
E) dividend payout
F)dividend yield
G)book value per share

Question 2

Which of the following is not a reason to interpret book value with caution?

Accepted Answer

A) Land may be worth more than it cost 
B) Depreciable assets may be held 
C) Investments may be worth more than their purchase price 
D) Patents may have a high market value 
E) All of the answers are correct. 
A) Land may be worth more than it cost 
B) Depreciable assets may be held 
C) Investments may be worth more than their purchase price 
D) Patents may have a high market value 
E) All of the answers are correct.

Question 3

The best dividend payout ratio:

Accepted Answer

A) approximates 50%. 
B) continues at the same level as was historically paid. 
C) is similar to the industry average. 
D) is higher than that of competitors. 
E) does not follow any rule of thumb for dividend payout. 
A) approximates 50%. 
B) continues at the same level as was historically paid. 
C) is similar to the industry average. 
D) is higher than that of competitors. 
E) does not follow any rule of thumb for dividend payout.

Question 4

Operating leverage refers to the existence of fixed operating costs.

Accepted Answer

A) True 
 B)False

Question 5

Stable dividend policy would most commonly imply:

Accepted Answer

A) a high price/earnings ratio. 
B) a stable dividend yield. 
C) stable dividends per share. 
D) stable earnings per share. 
E) increasing dividends per share. 
A) a high price/earnings ratio. 
B) a stable dividend yield. 
C) stable dividends per share. 
D) stable earnings per share. 
E) increasing dividends per share.

Question 6

Interest expense creates magnification of earnings through financial leverage because:

Accepted Answer

A) the interest rate is variable. 
B) interest accompanies debt financing. 
C) the use of interest causes higher earnings. 
D) interest costs are cheaper than the required rate of return to equity owners. 
E) while earnings available to pay interest rise,earnings to residual owners rise faster. 
A) the interest rate is variable. 
B) interest accompanies debt financing. 
C) the use of interest causes higher earnings. 
D) interest costs are cheaper than the required rate of return to equity owners. 
E) while earnings available to pay interest rise,earnings to residual owners rise faster.

Question 7

In general,new firms,growing firms,and firms perceived as growth firms will have a relatively low percentage of earnings retained.

Accepted Answer

A) True 
 B)False

Question 8

The earnings per share is computed for:

Accepted Answer

A) common stock. 
B) non-redeemable preferred. 
C) redeemable preferred. 
D) common stock and non-redeemable preferred stock. 
E) common stock and fully diluted preferred stock. 
A) common stock. 
B) non-redeemable preferred. 
C) redeemable preferred. 
D) common stock and non-redeemable preferred stock. 
E) common stock and fully diluted preferred stock.

Question 9

Smith reported the following for 2012. $\begin{array}{llcc}
  \text { Begining market price } & \$20.00 \
 \text { Average market price } &24.00\
 \text { Ending market price } &26.00\
 \text { Earnings per share: } &\
 \text {Basic  } &1.80\
 \text { Diluted } &1.60\
 \text {Cash dividends per share  } &1.00
\end{array}$

The price earnings ratio and dividend payout were:

Accepted Answer

A) 16.25 and 62.50%. 
B) 16.25 and 65.00%. 
C) 17.00 and 62.50%. 
D) 15.00 and 62.50%. 
E) 15.00 and 60.00%. 
A) 16.25 and 62.50%. 
B) 16.25 and 65.00%. 
C) 17.00 and 62.50%. 
D) 15.00 and 62.50%. 
E) 15.00 and 60.00%.

Question 10

Stock appreciation rights can have a material impact on reported earnings.

Accepted Answer

A) True 
 B)False

Match the ratio that goes with each formula. - $\frac{\text { Net Income - Preferred Dividends }}{\text { Weighted Average Number of Common}}$ Shares Outstanding

Which of the following is not a reason to interpret book value with caution?

The best dividend payout ratio:

Operating leverage refers to the existence of fixed operating costs.

Stable dividend policy would most commonly imply:

Interest expense creates magnification of earnings through financial leverage because:

In general,new firms,growing firms,and firms perceived as growth firms will have a relatively low percentage of earnings retained.

The earnings per share is computed for:

Smith reported the following for 2012. Begining market price \2 0.00 Average market price 24.00 Ending market price 26.00 Earnings per share: Basic 1.80 Diluted 1.60 Cash dividends per share 1.00 The price earnings ratio and dividend payout were:

Stock appreciation rights can have a material impact on reported earnings.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Exam 9: For the Investor

Match the ratio that goes with each formula. - Net Income - Preferred Dividends Weighted Average Number of Common\frac{\text { Net Income - Preferred Dividends }}{\text { Weighted Average Number of Common}} Weighted Average Number of Common Net Income - Preferred Dividends ​ Shares Outstanding

Which of the following is not a reason to interpret book value with caution?

The best dividend payout ratio:

Operating leverage refers to the existence of fixed operating costs.

Stable dividend policy would most commonly imply:

Interest expense creates magnification of earnings through financial leverage because:

In general,new firms,growing firms,and firms perceived as growth firms will have a relatively low percentage of earnings retained.

The earnings per share is computed for:

Smith reported the following for 2012. Begining market price \2 0.00 Average market price 24.00 Ending market price 26.00 Earnings per share: Basic 1.80 Diluted 1.60 Cash dividends per share 1.00 The price earnings ratio and dividend payout were:

Stock appreciation rights can have a material impact on reported earnings.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Match the ratio that goes with each formula. - $\frac{\text { Net Income - Preferred Dividends }}{\text { Weighted Average Number of Common}}$ Shares Outstanding