4. Comparability between enterprises is more difficult to obtain than comparability within a single enterprise. True False 5. Generally, the first concern of a financial analyst is a firm's liquidity. True False 6. The acid test ratio is regarded primarily as a measure of a company's long term liquidity situation. True False
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- 14 Which statement below is incorrect? Select one: You are running a regression of Y = a + BX1 + yX1 x2 + e You estimate a to be positive, B to be positive, and y to be negative. As a result, the impact of X1 on Y will be weakened by X2. O B. According to the agency theory, the agency problem is more significant for firms with a higher level of free cash flows. O C.if volatility of the underlying asset increases, it will increase the value of a call option but will decrease the value of a put option. D. Anchoring bias indicates that people tend to stay with the default option.2. High current and quick ratios indicate that a firm is managing its liquidity position well. * True O FalseAnswer the following question in essay. What do you understand by current ratio? What are it uses? What are its limitations? Ratio analysis is widely used as a tool of financial analysis, yet it suffers from various limitations. Explain. How can solvency of a firm be measured? What you understand by Liquidity ratios? Discuss their significance. Page 1 Module PSFM08 MANAGERIAL ACOUNTING WITH FINANCIAL ANALYSIS AND REPORTING Explain the importance of profitability ratio. How they are worked out?
- Which of the following statements is most correct? (Hint: Work Problem 4-16 before answering 4-17, and consider the solution setup for 4-16, as you think about 4-17.) a. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will raise the firm' expected return on common equity (ROE). b. The higher its tax rate, the lower a firm's BEP ratio will be, other things held constant. c. The higher the interest rate on its debt, the lower a firm's BEP ratio will be, other things held constant. d. The higher its debt ratio, the lower a firm's BEP ratio will be, other things held constant. e. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will decrease the firm's expected return on common equity (ROE).11. Which of the following security holders receives a lower returns with low risk? . T-Bill B. Common shareholders C. Stakeholders D. Creditors 12. The advantage of a company compared a sole trader as form of business organisation is: A. Quick decision making B. Access to external professional management skills C. Use of own funds D. Inability to access external funds Thank you!!!"If the firm's ROE is too low, the firm's debt ratio must be too low." True or false? Select one: O a. True O b. False
- 1. Explain the concept of of Principle no. 2 of Financial Management "There is risk-Return Trade Off2.Give examples of financial decisions faced by companies and individualsA firm has decided to switch from FIFO to LIFO. Ceteris paribus (all things being equal), what impact will the change in accounting have on the following variables? Assume an inflationary environment. Net profit will: OA increase OB decrease OC not change OD. cannot determineWhen we compute the EV/EBITDA multiple, i.e. the ratio of Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization, we estimate the enterprise value of a firm by adding the values of debt and equity and netting out cash. Could you provide a reason for netting out cash? O a. Cash can be used to pay down debt. O b. Cash is easy to value. O c. None of the given answers is correct. The income from cash is not part of EBITDA. Cash is liquid. O d. O e.
- What is the meant beta (β)? How would you interpret if β=1, β>1 and β<1? (6 marks)b. Differentiate between systematic and unsystematic risks. (4 marks)c. What is equity capital? Write two advantages and two disadvantages to the firm of raisingcapital this way. (5 marks)b) What is meant by capital structure and how is it different from financial structure?(5 markWhich of the following statements is correct?a. An increase in a firm’s inventories will call for additional financing unless theincrease is offset by an equal or larger decrease in some other asset account.b. A high quick ratio is always a good indication of a well-managed liquidityposition.c. A relatively low return on assets (ROA) is always an indicator of managerialincompetence.d. A high degree of operating leverage lowers the risk by stabilizing the firm’searnings streamV4. Which of the following statements is correct? Connection to northeastern.instructure.com was lost. Please make sure you're connected to the Internet before continuing. In perfect capital market, if an investor wants to have high risk and high return, she should only invest in firms with high leverage. In perfect capital market, leverage recap helps a firm to adjust its capital structure so as to increase firm value. In perfect capital market, share repurchase would increase stock value. O Leverage recap does not change firm value in a perfect capital market.