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Devry FIN 382 Week 5 Quiz

Question 1.(TCO 6) Book value is of limited use to the investment analyst because it is based on

• book numbers.
• actual numbers.
• historical numbers.
• forecasted numbers.

Question 2.(TCO 4) Some employees prefer restricted stock over options because they receive

• actual shares of stock.
• preferred stock only.
• a higher stock value.
• All of the above

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Question 3. (TCO 6) What is the effect of the exercise of stock options?

• They generate cash to the issuing firm, thereby increasing profit per share.
• They are an expense at the time of exercise. This lowers net income.
• They increase debt and lower borrowing capacity but have no effect on profit.
• They increase the numbers of shares outstanding.

Question 4. (TCO 6) Which of the following could cause return on assets to decline when net profit margin is increasing?

• Sale of investments at year-end
• Purchase of a new building at year-end
• Decline in book value
• Increased turnover of operating assets
• A stock split

Question 5 (TCO 5) Which of the following best indicates that a firm carries excess inventory?

• A decline in sales
• A decline in the current ratio
• Stable current ratio with declining quick ratios
• A rise in total asset turnover