Reference no: EM132539626

Problem 1: How many of these ratios measure the adequacy of profits?

Profit before interest and finance costs/ finance costs
Profit compared to total assets
Profit compared to sales
Profit compared to equity

a. 1
b. 2
c. 3
d. 4

Problem 2: If an entity is able to earn more on borrowings than the cost of those borrowings the return on equity will:

a. increase.
b. decrease.
c. be unchanged.
d. vary.

Problem 3: The debt ratio measures:

a. the proportion of assets financed by borrowing.
b. the time taken to collect debts.
c. liquidity.
d. profits earned in relation to debt.

Problem 4: Protan Ltd has the following summary balance sheet at year-end.

Current assets $ 700 000
Long-term assets 1 000 000
Current liabilities 100 000
Long-term liabilities 300 000
Share capital 600 000
Retained earnings 700 000

The debt ratio at year-end is:

a. 76.5 %.
b. 23.5 %.
c. 40 %.
d. 17.6%.

Problem 5: All of these ratios are measures of aspects of a firm's profitability, except:

a. return on total assets.
b. earnings yield.
c. current ratio.
d. dividend yield.