Podcast
Questions and Answers
What effect does borrowing have on a firm's business risk?
What effect does borrowing have on a firm's business risk?
- Borrowing reduces the firm's business risk
- Borrowing stabilizes the firm's business risk
- Borrowing magnifies the firm's business risk (correct)
- Borrowing has no effect on the firm's business risk
Which firm's ROE shows wider variation in response to changes in EBIT?
Which firm's ROE shows wider variation in response to changes in EBIT?
- Neither firm shows any variation
- Both firms show the same variation
- Firm D
- Firm F (correct)
What is the Weighted Average Cost of Capital (WACC) for KELLER?
What is the Weighted Average Cost of Capital (WACC) for KELLER?
- 2%
- 4%
- 10% (correct)
- 8%
What is the net sales for KELLER in 2016?
What is the net sales for KELLER in 2016?
What is the expected total invested capital for KIDDY WONDER WORLD in 2019?
What is the expected total invested capital for KIDDY WONDER WORLD in 2019?
What does the value contribution in the context of VOLKSWAGEN correspond to?
What does the value contribution in the context of VOLKSWAGEN correspond to?
What is the main shortcoming of the current ratio as mentioned in the text?
What is the main shortcoming of the current ratio as mentioned in the text?
What is the effect of the firm's economic sector on its working capital requirement?
What is the effect of the firm's economic sector on its working capital requirement?
In the financial statement analysis, what is the ratio between long-term debt and equity for the company in one of the examples?
In the financial statement analysis, what is the ratio between long-term debt and equity for the company in one of the examples?
What is the total amount of short-term debt in one of the examples mentioned in the financial statement analysis?
What is the total amount of short-term debt in one of the examples mentioned in the financial statement analysis?
What is one reason mentioned for a company facing cash problems despite having a strong current ratio?
What is one reason mentioned for a company facing cash problems despite having a strong current ratio?
What is the assumption about the operating profit in the financial leverage analysis?
What is the assumption about the operating profit in the financial leverage analysis?
What does ROIC before tax stand for?
What does ROIC before tax stand for?
What does the abbreviation 'EBIT' stand for in the context of the text?
What does the abbreviation 'EBIT' stand for in the context of the text?
In the financial leverage analysis, what does a positive leverage effect indicate?
In the financial leverage analysis, what does a positive leverage effect indicate?
What is the impact on profitability for firm F when EBIT decreases to $20 million?
What is the impact on profitability for firm F when EBIT decreases to $20 million?
For which firm did the leverage effect have a negative impact on ROE before tax?
For which firm did the leverage effect have a negative impact on ROE before tax?
What is the formula for financial leverage in the context of this text?
What is the formula for financial leverage in the context of this text?
What is the implication of a negative ROE before tax?
What is the implication of a negative ROE before tax?
What does 'IB' stand for in the financial leverage analysis?
What does 'IB' stand for in the financial leverage analysis?
What do positive ROICBT and ROEBT indicate in the context of the text?
What do positive ROICBT and ROEBT indicate in the context of the text?
What happens to the leverage effect when EBIT decreases?
What happens to the leverage effect when EBIT decreases?
What does 'Equity IB Debt' represent in the financial leverage analysis?
What does 'Equity IB Debt' represent in the financial leverage analysis?