Ratios-profitability and Equity Flashcards
true or false, return on owners equity uses both common and preferred shareholders equity in the denominator
True
True or false, the debt ratio uses shareholders equity as the denominator
False
In computing the dividend payout rate for common shareholders does the dividens received by common shareholders get divided by total net income?
No
When computing return on common stock equity does all preferred dividends in arrears get subtracted from net income in the numerator?
No
When computing return on common stock equity should only common stockholders equity at year-end be used?
No
True or false, the purchase of treasury stock by an entity will decrease its book value per share of common stock?
False
True or false, the debt to equity ratio indicates to which extent assets are provided by non-owners and owners
True
If total assets is $760,000, capital stock is $150,000 and retained earnings is $215,000 what is the debt to equity ratio and how was it calculated?
1.08 you need to determine debt by adding capital stock and retained earnings and subtracting that from assets. then divide debt by the total of capital stock and retained earnings.
Are defensive-interval ratio and return on stockholders equity useful in assessing the liquidity of a company?
Defensive-interval ratio is because it is the ratio of quick assets to daily operating expenditures. Return on stockholders equity is not because it relates to profitability.
How do you figure total assets if you know the accounts receivable turnover for the year, the total assets turnover for the year and the average receivables?
Divide the AR turnover by the total assets turnover and multiply average receivables by that number.
How do you calculate the book value per share of common stock?
total owners equity divided by the number of shares outstanding.
