Financial management homework help

Posted on 2014-02-25 13:26:00 in Management by AUSTIN

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Two identical firms, A and B, have the same revenue of $10 million and equal variable and fixed costs for the current year. At the start of the year, they both owned $20,000,000 in equipment which follows a depreciation schedule of 5% per year. Over the year A decided not to replace the depreciated equipment, while B did. They otherwise acted equivalently. Which of the following is a correct implication?



A’s interest coverage ratio over the year exceeded B’s.



B’s interest coverage ratio over the year exceeded A’s.



B paid less in profits tax than A



B will have less cash than A at year’s end.

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Which of the following is(are) added back to Net Profits After Taxes to produce the numerator in Coverage Ratio? There may be more than one; full credit requires all correct choices. Partial credit will be awarded.



profits taxes



preferred dividends



interest on debt



cost of materials



depreciation

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Which of the following is/are true statements? There may be more than one; full credit requires all correct choices. Partial credit will be awarded.



Book value is backward looking; market value is forward looking



Market value is backward looking; book value is forward looking



All else the same, the more profits per share are expected to grow in the future, the higher the ratio of the firm’s market value to its book value



All else the same, the more profits per share are expected to grow in the future, the higher the ratio of the firm’s book value to its market value



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Which of the following is/are true statements? There may be more than one; full credit requires all correct choices. Partial credit will be awarded.



Whenever a firm issues additional new shares, the result will ultimately be dilution



Whether issuance of new shares is ultimately dilutive or not depends upon the relationship between the Return on Investment from the new funds and the existing Return on Equity



When a company pays out all net earnings as dividends, it is dilutive



None of the above

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Which of the following would be an asset on your personal balance sheet?



The amount you owe on your credit card



The difference between the amount you owe and the credit limit on your credit card



The total payments you made on your credit card since you established it



None of the above

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A bank decides to make a loan to its customer. Which of the following would be a way to “fund” (get the money for) the loan? There may be more than one; full credit requires all correct choices. Partial credit will be awarded.



A different customer deposits money into her checking account



An investor purchases a CD from the bank



The bank sells a security it owns



The bank borrows from another bank

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Which of the following is/are an asset to a bank? There may be more than one; full credit requires all correct choices. Partial credit will be awarded.



Cash held in its vault



A loan to a customer



A loan to another bank via the federal funds market



A demand deposit of a customer



A borrowing from another bank via the federal funds market



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Jake has a demand deposit account with JPMorganChase. He writes a check to Yolanda’s Grocery Store, YGC, who deposits the check in KeyBank. What are the respective balance sheet effects for the two banks?



JPMorgan’s deposit liability to Jake decreases; its reserves at the Fed increase



PMorgan’s deposit liability to Jake increases; its reserves at the Fed decrease



KeyBank’s deposit liability to YGC decreases; its reserves at the Fed increase



KeyBank’s deposit liability to YGC increases; its reserves at the Fed decrease



JPMorgan’s reserves at the Fed decrease; KeyBank’s reserves at the Fed increase

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