MGT203 Final Examination

The dividend payout ratio divided by the dividend yield ratio equals the price-earnings ratio.

• TRUE

• FALSE

Assuming a current ratio greater than 1, acquiring land by issuing more of the company's common stock will increase the current ratio.

• TRUE

• FALSE

The gross margin percentage is computed by dividing the gross margin by net sales.

• TRUE

• FALSE

Earnings per share is computed by dividing net income (before deducting preferred dividends) by the average number of common shares outstanding.

• TRUE

• FALSE

The dividend payout ratio divided by the dividend yield ratio equals the price-earnings ratio.

• TRUE

• FALSE

EPS is computed by dividing net income (after deducting preferred dividends) by the average number of common shares outstanding.

• TRUE

• FALSE

The dividend payout ratio multiplied by the dividend yield ratio equals the price-earnings ratio.

• TRUE

• FALSE

STEVE Company wrote off $100,000 in obsolete inventory. The company's inventory turnover ratio would:

• Increase

• Decrease

• Remain unchanged

• Impossible to determine

The market price of Friden Company's common stock increased from $15 to $18. Earnings per share of common stock remained unchanged. The company's price-earnings ratio would:

• Increase

• Decrease

• Remain unchanged

• Impossible to determine

Fred Corporation's net income last year was $2,604,000. The dividend on common stock was $2.50 per share and the dividend on preferred stock was $2.40 per share. The market price of common stock at the end of the year was $73.50 per share. Throughout the year, 300,000 shares of common stock and 100,000 shares of preferred stock were outstanding. The price-earnings ratio is closest to:

• 9.33

• 11.89

• 13.66

• 8.47