## FA Mod 4 Profitability ratios practice exam questions

 Author Message NEAS Supreme Being         Group: Administrators Posts: 4.2K, Visits: 1.2K FA Module 4 Profitability ratios practice exam questions(The attached PDF file has better formatting.)A firm’s balance sheet shows    December 31, 20X1    December 31, 20X2Long-term and short term debt    84    91Other liabilities    14    37Common stock + additional paid-in capital    85    72Retained earnings    32    49The firm declared and paid shareholder dividends of 33 in 20X2.Question 4.2: Shareholders’ equityWhat is shareholders’ equity at December 31, 20X1 and 20X2? Answer 4.2: (add stock and retained earnings) ●    December 31, 20X1: 85 + 32 = 117●    December 31, 20X2: 72 + 49 = 121Question 4.3: Total assetsWhat are total assets at December 31, 20X1 and 20X2? Answer 4.3: (total assets = debt + other liabilities + shareholders’ equity) ●    December 31, 20X1: 84 + 14 + 117 = 215●    December 31, 20X2: 91 + 37 + 121 = 249Question 4.4: Financial leverage What is the financial leverage at December 31, 20X1 and 20X2? Answer 4.4: (financial leverage = total assets / shareholders’ equity) ●    December 31, 20X1: 215 / 117 = 1.838●    December 31, 20X2: 249 / 121 = 2.058Question 4.5: Net income What is net income in 20X2? Answer 4.5: 33 + (49 – 32) = 50(net income = shareholder dividends + Δ(retained earnings) )Question 4.6: Return on equityWhat is the return on equity in 20X2? Answer 4.6: 50 / ( (117 + 121) / 2) = 42.02%(return on equity = net income / average shareholders’ equity)Question 4.7: Return on assets What is the return on assets in 20X2? Answer 4.7: 50 / ( ( 215 + 249) / 2) = 21.55%(return on assets = net income / average assets)
##### Merge Selected
Merge into selected topic...

Merge into merge target...

Merge into a specific topic ID...