Which of the following statements is not true?
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- Which of the following statements is not correct? Group of answer choices A)Purchasing fixed assets using cash decreases the current ratio. B)Accruing a commission expense will affect the net profit margin ratio. C)Increasing the financial leverage ratio guarantees the net profit margin ratio will increase. D)Purchasing treasury stock results in a decrease in the current ratio. E)All of the above are correctWhich of the following statements is incorrect? Multiple Choice О Purchasing fixed assets through equity financing decreases total asset turnover. Accruing an expense decreases earnings per share. The return on equity ratio increases when treasury stock is purchased. О The purchase of fixed assets will cause the total asset turnover to increase.When 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.
- If the generated income cash of some company were used to buy back common stock,thus reducing the amount of common equity ,how would this affect the return on equity (ROE),return on Asset(ROA) and ratio of total debt to total asset?If Alex Corporation takes out a bank loan to purchase a machine used in production and everything else stays the same, its equity multiplier will ________, and its ROE will ________. A) increase; increase B) decrease; decrease C) increase; decrease D) decrease; increaseA firm is planning to borrow money to make an equity repurchase to increase its stock price. It is basing its analysis on the fact that there will be fewer shares outstanding after the repurchases, and higher earnings per share. There are no taxes. a. Will earnings per share always increase after such an action? Explain.b. Will the higher earnings per share always translate into a higher stock price? Explain.c. Under what conditions will such a transaction lead to a higher price?
- In the Merton model of corporate equity which is based on the Black Scholes formula, what is the quantity (S0/KT)? Assume that interest rates are zero (r=0) so the time value of money can be ignored, therefore S0 = ST. (a) Debt-to-equity ratio. (b) Debt-to-assets ratio. (c) Assets-to-debt ratio. (d) Assets-to-equity ratio. (e) Equity-to-assets rati1. . Assuming that shareholders expect no growth from their investment, what would the cost of equity be? 2. If retained earnings were used instead of new issuances, what would the cost of the new financing be?Which statement is true? O A. Financial statements reflect economic costs. O B. Year-over-year decreases in liabilities are sources of cash. O C. A stock with a beta of 1.00 has the total risk of the market portfolio. O D. Shareholders have the prior claim to the cash flows of a corporation. O E. None of the above are true.
- 1. Opportunity cost of capital (S2.1) Which of the following statements are true? The opportunity cost of capital: a. Equals the interest rate at which the company can borrow. b. Depends on the risk of the cash flows to be valued. c. Depends on the rates of return that shareholders can expect to earn by investing on their own. d. Equals zero if the firm has excess cash in its bank account and the bank account pays no interest.of stion According to MM Case II, if the expected return on assets decreases, what happens to the expected return on equity? Select one: Oa increases O b. remains constant Oc decreases O d. depends on the firm's capital structure Time leWhich of the following would likely increase return on equity (ROE)? a. Cutting operating costs b. Raising the dividend c. Increasing the firm's business risk d. Lowering the debt