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1. Assume you borrowed $25,000 at the rate of 8% and should repay it in 4 equal installments at the end of each of next 4 years. How large would your payments be?

a. $7,691.45
b. $7,548.02
c. $7,324.89
d. $7,011.87
e. $7,854.13

2. If bank loan officer were thinking of a company's request for loan, which of the given statements would you consider to be right ?

a. The lower company's TIE ratio, other things held constant, lower the interest rate the bank would charge firm.
b. The lower company's EBITDA coverage ratio, other things held constant, the lower the interest rate the bank would charge the firm.
c. Other things held constant, the lower the current asset ratio, the lower the interest rate the bank would charge the firm.
d. Other things held constant, the lower the debt ratio, the lower the interest rate the bank would charge firm.
e. Other things held constant, the higher the debt ratio, the lower interest rate the bank would charge firm.

3. During latest year Ruth Corp. had sales of $300,000 and net income of $20,000, and its year-end assets were $200,000. Firm's total debt to total assets ratio was 40%. Based on Du Pont equation, determine the firm's ROE?

a. 15.33%
b. 15.67%
c. 16.00%
d. 16.33%
e. 16.67%

4. Rangoon Corp's sales last year were $400,000, and its year-end total assets were $300,000. Average firm in industry has total assets turnover ratio (TATO) of 2.5. New CFO thinks firm has excess assets which can be sold so as to bring TATO down to industry average without affecting sales. By how much should the assets be reduced to bring TATO to industry average?

a. $100,000
b. $110,000
c. $120,000
d. $130,000
e. $140,000

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  • Category:- Accounting Basics
  • Reference No.:- M919514

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