A Firm Has a (Net Profit/pretax Profit)ratio of 0

question 45

Multiple Choice

A firm has a (net profit/pretax profit) ratio of 0.6,a leverage ratio of 2,a (pretax profit/EBIT) of 0.6,an asset turnover ratio of 2.5,a current ratio of 1.5,and a return on sales ratio of 4%.The firm's ROE is ________.

• A) 2.9%
• B) 4.3%
• C) 7.2%
• D) 15.0%
• E) none of these

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Definitions:

Strike Price

The price at which the holder of an option contract can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Risk-free

An investment category that promises return payments with zero default risk, often exemplified by treasury bonds of stable governments.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase an asset at a specified price within a specific time period.

Put

A put is an options contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price before the contract expires.