Ratio Analysis Paper 9

1

The use of debt in the capital structure of a firm






2

A financial analyst with Mineral, Inc., calculated the companyís degree of financial leverage as 1.5. If income before interest increases by 5%, earnings to shareholders will increase by






3

Which one of the following statements concerning the effects of leverage on earnings before interest and taxes (EBIT) and earnings per share (EPS) is correct?






4

Since incorporating 3 years ago, Lawrence, Inc., has estimated bad debts at a rate of 3% using the income statement approach. During its fourth year in business, after recording the uncollectible accounts expense based on its previous estimate, Lawrence determined that its estimate of bad debts should be increased to 4.5%. During this fourth year, Lawrence recorded sales of $25,000,000 and had an ending accounts receivable balance of $2,000,000. This change would decrease






5

Which of the following costs, when subtracted from total revenue, yields economic profit?






6

All of the following are affected when merchandise is purchased on credit except






7

On December 31, year 2, Northpark Co. collected a receivable due from a major customer. Which of the following ratios would be increased by this transaction?






Result

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