11) Earnings per share is only computed for:
A) preferred stock.
B) treasury stock.
C) common stock.
D) preferred and common stock.
12) Dammer Corporation wants to raise $2,000,000. The corporation plans to sell 7%, 10-year bonds at the face value of $2,000,000. Dammer Corporation currently has 150,000 shares of stock outstanding and net income of $1,500,000. The $2,000,000 from the bond sale is expected to generate additional income of $500,000 before interest and taxes. The income tax rate is 30%. What are the earnings per share after the sale of bonds?
A) $10.00
B) $11.68
C) $12.33
D) $12.40
13) Drury Corporation wants to raise $2,000,000. The corporation plans on selling 100,000 shares of $20 par value common stock. Drury Corporation currently has 150,000 shares of stock outstanding and net income of $1,500,000. The $2,000,000 from the stock sale is expected to generate additional income of $500,000 before interest and taxes. The income tax rate is 30%. What are the earnings per share after the sale of 100,000 shares of stock?
A) $7.40
B) $8.00
C) $9.40
D) $10.00
14) Frank's Boat Shop, Inc. reports net income of $63,000, income before taxes of $90,000 and interest expense of $18,000. The weighted-average number of shares of common stock outstanding during the year was 30,000 shares. What is the times-interest-earned ratio?
A) 3.5
B) 5.0
C) 6.0
D) 8.9
15) Lloyd's Boat Shop, Inc. reports net income of $63,000, income before taxes of $90,000 and interest expense of $18,000. The weighted-average number of shares of common stock outstanding during 2012 was 30,000 shares. The gross profit was $160,000. What are the earnings per share?
A) $2.10
B) $3.00
C) $3.60
D) $5.33
16) The leverage ratio is equal to:
A) total debt divided by total assets.
B) total debt divided by total stockholders' equity.
C) total long-term debt divided by total stockholders' equity.
D) total assets divided by total stockholders' equity.
17) According to DuPont analysis, the impact of debt on a company's profitability is measured by the:
A) return on sales ratio.
B) return on assets ratio.
C) return on equity ratio.
D) leverage ratio.
18) Following the DuPont analysis model, the higher the leverage ratio, the higher the:
A) net profit margin ratio.
B) return on assets.
C) return on sales.
D) return on stockholders' equity.
19) When a company uses borrowed money to earn a higher profit than the cost of the interest, this is called:
A) the asset multiplier effect.
B) the debt multiplier effect.
C) trading on the equity.
D) riding the interest effect.
20) A company has return on assets of 10%. Return on sales are 5%. The leverage ratio is 2.0. Following DuPont analysis, what is return on equity?
A) 5%
B) 10%
C) 20%
D) 25%
21) A company has return on assets of -10%. Return on sales are -5%. The leverage ratio is 2.0. Following DuPont analysis, what is return on equity?
A) -5%
B) -10%
C) -20%
D) -30%