Assume All Assets Are Operating Assets; All Current Liabilities Are

question 7

Multiple Choice

$$\begin{array} { l r r } & \underline { 2006 } & \underline { 2005 } \\\text { Current assets } & \$ 4,650 & \$ 4,730 \\\text { Long-term assets } & 7,120 & 6,450 \\\text { Current liabilities } & 1,440 & 1,340 \\\text { Long-term debt } & 3,830 & 3,760 \\\text { Common equity } & 6,500 & 6,080 \\& & \\\text { Operating income } & 2,140 & \\\text { Interest expense } & 240 & \\\text { Tax expense } ( 40 \% ) & 760 & \\\text { Net income } & 1,140 &\end{array}$$
Assume all assets are operating assets; all current liabilities are operating liabilities.
-Return on net operating assets for 2006 is:

• A)11.30%.
• B)12.03%.
• C)9.93%.
• D)11.19%.

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Definitions:

Financing Alternatives

Different options available for a business or individual to fund their activities, including loans, equity investments, and leasing.

Debt to Assets Ratio

A financial metric indicating the proportion of a company's assets that are financed by debt, offering insights into financial leverage.

Times Interest Earned Ratio

A financial ratio that measures a company's ability to meet its debt obligations by comparing its earnings before interest and taxes to its interest expenses.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, including the balance sheet, income statement, and cash flow statement.