Reference no: EM132539635

Problem 1: The use of borrowed funds in an attempt to earn a return greater than the cost of borrowing is known as:

a. gearing or leverage.
b. capital budgeting.
c. equity funding.
d. overdraft financing.

Problem 2: If the interim dividend was 5c per ordinary share, the final dividend 7c per share and the market price per share on 30 June 2014 $3.20, the dividend yield is:

a. 3.75%.
b. 37.5%.
c. 26.7%.
d. 6%.

Problem 3: Belfast Water Works had a profit of $300 000 before tax, after deducting $27 000 in interest expense. Belfast's liabilities and equity total $2 725 000. Return on total assets, before finance costs and tax is:

a. 10.4%.
b. 11.0%.
c. 12.0%.
d. unable to be calculated from the information provided.

Problem 4: The profit margin ratio measures:

a. return to shareholders.
b. the proportion of each sales dollar that represents profit.
c. the difference between the purchase price and the selling price of inventory.
d. the rate of return on total assets.

Problem 5: All of these ratios are indicators of profitability except:

a. return on equity.
b. earnings per share.
c. capitalisation ratio.
d. profit margin.