29) If Firm A and Firm B are in the same industry and use the same production method and Firm A’s asset turnover is higher than that of Firm B then all else equal we can conclude: A) Firm A is more efficient than Firm B. B) Firm A has a lower dollar amount of assets than Firm B. C) Firm A has higher sales than Firm B. D) Firm A has a lower ROE than Firm B. 30) The firm’s equity multiplier measures: A) the value of assets held per dollar of shareholder equity. B) the return the firm has earned on its past investments. C) the firm’s ability to sell a product for more than the cost of producing it. D) how efficiently the firm is utilizing its assets to generate sales. 31) If Alex Corporation takes out a bank loan to purchase a machine used in production and everything else stays the same its equity multiplier will ________ and its ROE will ________. A) increase; increase B) decrease; decrease C) increase; decrease D) decrease; increase 32) The DuPont Identity expresses the firm’s ROE in terms of: A) profitability asset efficiency and leverage. B) valuation leverage and interest coverage. C) profitability margins and valuation. D) equity assets and liabilities. 33) Suppose Novak Company experienced a reduction in its ROE over the last year. This fall could be attributed to: A) an increase in net profit margin. B) a decrease in asset turnover. C) an increase in leverage. D) a decrease in Equity. 34) If Moon Corporation has an increase in sales which of the following would result in no change in its EBIT margin? A) A proportional increase in its net income B) A proportional decrease in its EBIT C) A proportional increase in its EBIT D) An increase in its operating expenses 35) If Moon Corporation’s gross margin declined which of the following is TRUE? A) Its cost of goods sold increased. B) Its cost of goods sold as a percent of sales increased. C) Its sales increased. D) Its net profit margin was unaffected by the decline. 36) The inventory days ratio measures: A) the average length of time it takes a company to sell its inventory. B) the average length of time it takes the company’s suppliers to deliver its inventory. C) the level of sales required to keep a company’s average inventory on the books. D) the percentage change in inventory over the past year.
