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kaplan MT482 unit 9 quiz

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Question;Question 1.1.Which of the following is least likely to affect analysis of earnings persistence?(Points: 2) Managerial compensationChanges in accounting principleCyclicality of businessSeasonality of businessQuestion 2.2.Horace Corporation has $200,000 of convertible 5% bonds. Each $500 bond is convertible into 50 shares of common stock. The bonds were sold at par and are currently trading at par, and the required return on nonconvertible bonds of similar risk is 11%. Common stock is trading at $ 23 per share.The total leverage ratio of a company will:(Points: 2) increase if operating leases are capitalizedincrease if a company sells its receivablesincrease if a company sells more equityincrease if a company pays suppliers more quicklyQuestion 3.3.If a firm capitalizes a lease instead of treating the lease as an operating lease, the effect on the current ratio and the debt-to-equity ratio will be to:(Points: 2) Option AOption BOption COption DQuestion 4.4.A primary motivation for a company financing its business activities through debt isnot(Points: 2) Trading on the equityReducing earnings variabilityTax-deductibility of interestAvoiding earnings dilutionQuestion 5.5.ABC company is planning a major expansion for which it needs $5 million in external funding. It has various options as how to finance this expansion. Which of the following iscorrect?(Points: 2) Future ROA will be higher if it uses all equity financing than if it uses some debt financingFuture net income will be higher if it uses common stock rather than preferred stock to finance expansionFuture ROA is independent of the form of financingFuture net income is independent of the form of financingQuestion 6.6.Below is information for year ended 12/31/05 for Company A and Company B.Return on assets for Company A and B for 2005 are:(Points: 2) Option AOption BOption COption DQuestion 7.7.Which of the following statements arecorrectwith respect to the times interest earned ratio?I. It is independent of operating incomeII. It is independent of the interest rate paid on debtIII. It is independent of the tax rateIV. It is independent of the amount of dividends paid(Points: 2) I, II and IIII and IIII and IVIII and IVQuestion 8.8.Hupta CorporationNet income is expected to increase by 10% for the next year, and dividend payout ratio is expected to remain constant. After 2006, residual earnings are expected to decrease to zero. Using the earnings-based valuation method what is the value per share of Hupta stock as of 12/31/05?(Points: 2) $33.60$33.27$32.73$30.00Question 9.9.Which of the following is not included the definition of earnings persistence?(Points: 2) Stability of the earningsMagnitude of the earningsPredictability of the earningsThe earnings' trendQuestion 10.10.A company has significant uncapitalized operating leases. This company has positive net income. If these were capitalized the effect on the following ratios would be:(Points: 2) Option AOption BOption COption D

 

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