Reference no: EM132503273

Question 1. Cookie Monster, Inc. is a publicly traded company that is trading at $25 per share on the Dow Jones Industrial Average (DJIA) market. If the share drops in value to $20 per share, does this impact the income statement of the company?

a. No. A drop in the share price does not affect the income statement because it is not a revenue event.

b. Yes. A drop in the share price affects the balance sheet of the company and thus indirectly the income statement.

c. No. The drop in the share price only affects nonowners of the shares.

d. Yes. The drop in the price impacts the income statement as it makes the company less valuable.

Question 2. When looking at a companies current ratio, we ignore long-term liabilities and long-term assets.

a. True.

b. False.

Question 3. If a company has 25 million shares outstanding, with the value of each share being $10, and the company has a marginal tax rate of 40 percent and EBITDA of $215,500, what is the total market capitalization of the company?

a. $40,000,000

b. $2,150,000

c. $250,000,000

d. None of these options.