If a Firm Produces a Twelve Percent Return on Assets

question 35

Multiple Choice

If a firm produces a twelve percent return on assets and also a twelve percent return on equity,then the firm:

• A)may have short-term, but not long-term debt.
• B)is using its assets as efficiently as possible.
• C)has no net working capital.
• D)has a debt-equity ratio of 1.0.
• E)has an equity multiplier of 1.0.

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Definitions:

Dividend Policy

A company's strategy or guidelines for making dividend payments to its shareholders.

Share Value

The price at which a particular share of stock is traded on the market, determined by supply and demand.

Ex-dividend Date

The date on which a stock trades without its dividend, meaning that the seller is entitled to the dividend, not the buyer.

Regular Cash Dividend

A payment made by a company to its shareholders, usually in the form of cash, out of its profits or reserves on a regular basis, such as quarterly or annually.