15 Over time Crosby Inec has seen its cash coveagr ratio dec

15) Over time, Crosby, Inec, has seen its cash coveagr ratio decrease and its sotal assert tunover ratio increase Which of the following could you condude from these changes? A) Crosby is doing a bettee job in generating sales from its assets. B) Crosby is less likely to delasit on its cutstanding debt s C) Crosby is now holding mone cash in relation to its espense D) The changes described shove are totally unrelated to any of the above. 16) Which of the following is TRUE A) As a stock investor you would pay the bid price when punchasing shares B) Ceterie paribus, according to the Dupont framework, as a firm\'s use of debt increases so will its ROE C) In the common-size balance sheet total revenue will always be represented as 100% of total assets or Di Comparison of dollar valurs on two frin\'s halance sheets is the best way to analyze the firms relative financial health 2 1 a company\'s equity multiplier is 2.50 which of the following ratios would the company have? A) D/E-1.50. D/A 1.67 C)DE-350, DA #060 B) DE 3.50, D/A-167

Solution

16. Option A is not true as Bid Price is the price at which dealer is willing to buy the security. in order to purchase shares investor has to pay the price at which dealer is willing to sell the securities which is called ask price.

Option B is true, as three main factors that increases ROE are higher turnover, higher margin and higher Debt if every thing else remain same

Option C is not true as revenue is part of P&L so can\'t be shown as percentage of asset which Balance sheet item.

Option D is not true as we cannot sayComarision of dollar value is the best way to analyse the relative financial strength

17. D/A= 1-(1/equity multiplier)

=0.60

D/E= Equity multiplier( Asset/Equity)* Debt to asset ratio= 2.5*.60=1.5

Hence option D is correct