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web.groovymark@gmail.com
- December 23, 2024
Question 41
A company has total assets of $1,200,000 and total liabilities of $800,000. What is its equity multiplier?
- a) 1.25
- b) 1.33
- c) 1.50
- d) 2.00
Answer: d) 2.00
Explanation: The equity multiplier is calculated as Total Assets / Total Equity. Total Equity = $1,200,000 - $800,000 = $400,000. Therefore, Equity Multiplier = $1,200,000 / $400,000 = 3.00.
Question 42
A company has $300,000 in accounts receivable and $400,000 in inventory. If its current liabilities are $500,000, what is its quick ratio?
- a) 0.4
- b) 0.6
- c) 0.8
- d) 1.0
Answer: b) 0.6
Explanation: The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities. In this case: ($300,000 - $400,000) / $500,000 = 0.6.
Question 43
What is the primary function of the Securities and Exchange Commission (SEC)?
- a) To regulate the U.S. stock exchanges
- b) To enforce tax laws
- c) To set interest rates for corporate debt
- d) To provide financial guidance to companies
Answer: a) To regulate the U.S. stock exchanges
Explanation: The SEC is responsible for regulating securities markets, ensuring transparency, and enforcing laws to protect investors.
Question 44
A company has a dividend payout ratio of 40% and a retention ratio of 60%. What is its sustainable growth rate (SGR) if its return on equity (ROE) is 15%?
- a) 5.0%
- b) 7.5%
- c) 9.0%
- d) 12.0%
Answer: c) 9.0%
Explanation: The SGR is calculated as ROE × Retention Ratio. In this case: 15% × 60% = 9.0%.
Question 45
A company has $600,000 in net income and pays out $180,000 in dividends. What is its dividend payout ratio?
- a) 25%
- b) 30%
- c) 40%
- d) 50%
Answer: b) 30%
Explanation: The dividend payout ratio is calculated as Dividends / Net Income. In this case: $180,000 / $600,000 = 30%.
Question 46
A bond is trading at a price of $950 with a face value of $1,000. What does this indicate?
- a) The bond is trading at a premium
- b) The bond is trading at a discount
- c) The bond is trading at par value
- d) The bond has defaulted
Answer: b) The bond is trading at a discount
Explanation: When a bond is priced below its face value, it is trading at a discount, typically because its coupon rate is lower than current market rates.
Question 47
A company has a beta of 1.2, a risk-free rate of 3%, and a market return of 7%. What is the stock’s expected return using CAPM?
- a) 7.2%
- b) 7.8%
- c) 8.2%
- d) 8.8%
Answer: b) 7.8%
Explanation: Using CAPM, Expected Return = Risk-Free Rate + Beta × (Market Return - Risk-Free Rate). In this case: 3% + 1.2 × (7% - 3%) = 7.8%.
Question 48
What does a company’s inventory turnover ratio measure?
- a) The number of days inventory is held
- b) The company’s efficiency in managing its inventory
- c) The company’s profitability relative to sales
- d) The company’s liquidity position
Answer: b) The company’s efficiency in managing its inventory
Explanation: The inventory turnover ratio measures how efficiently a company manages its inventory by calculating how many times inventory is sold and replaced over a period.
Question 49
A company has total assets of $800,000, total liabilities of $500,000, and total equity of $300,000. What is its debt-to-equity ratio?
- a) 0.60
- b) 0.80
- c) 1.0
- d) 1.67
Answer: d) 1.67
Explanation: Debt-to-equity ratio is calculated as Total Liabilities / Total Equity. In this case: $500,000 / $300,000 = 1.67.
Question 50
A company has a dividend yield of 3% and a stock price of $40. What is its annual dividend per share?
- a) $0.80
- b) $1.00
- c) $1.20
- d) $1.50
Answer: c) $1.20
Explanation: Dividend yield is calculated as Annual Dividend / Stock Price. Rearranging the formula, Annual Dividend = Dividend Yield × Stock Price. In this case: 0.03 × $40 = $1.20.
