B3: Asset Effectiveness and Efficiency

Question 1

What are the four variations of Asset Valuation

Answer 1

1. NBV
2. Gross Book Value
3. Replacement Cost
4. Liquidation value

Question 2

Limitation of ROI

Answer 2

Short term focus and disincentive to invest

Question 3

What are the three components of the Dupont Model

Answer 3

Net Profit Margin, Asset Turnover, and Financial Leverage

Question 4

What are the Five Components of the Extended Dupont moddel

Answer 4

Tax burden, Interest burden, Operating income margin, asset turnover, and financial leverage

Question 5

What is the advantage in using the Extended Dupont Model for ROE

Answer 5

Management is able to get a better understanding of what factors are driving ROE and how those factors compare relative to competing companies and to the industry overall

Question 6

What is Residual Income

Answer 6

It is a method that measures the excess of actual income earned by an investment over the return required by the company

Question 7

what is the Times interest earned ratio

Answer 7

it is the company’s ability to meet its interest obligations on long term debt