PART A Which of the following does not describe the impact of a firm's capital structure on
Question:
PART A
Which of the following does not describe the impact of a firm\'s capital structure on ROA and ROCE?
Multiple Choice
A highly levered firm can be advantageous to common stockholders.
For a firm with no debt, ROCE will likely be the same as the ROA.
For a high-debt firm experiencing a profitable year, ROCE will likely be higher than ROA if the debt was used to support operations.
For a high-debt firm experiencing a profitable year, ROCE will likely be lower than ROA if the debt was not used to support operations.
PART B
Common value-relevant attributes for determining the value of a company include all the following except:
Multiple Choice
Balance sheet book values.
Free cash flows.
Accounting earnings.
Fair value of fixed assets.
PART C
Consider the following table of Actual earnings:
Firm A | Firm B | Firm C | |||||||||
Actual earnings | $ | 6,000 | $ | 14,000 | $ | 18,000 | |||||
r | 10 | % | 8 | % | 12 | % | |||||
BVt-1 | $ | 100,000 | $ | 150,000 | $ | 190,000 | |||||
What are the abnormal earnings for Firm B?
Multiple Choice
$14,000
$1,000
$2,000
$12,000
Forensic Accounting and Fraud Examination
ISBN: 978-0078136665
2nd edition
Authors: William Hopwood, george young, Jay Leiner