Chapter 2--Analysis of Fina - Copy

Which of the following statements is most correct a

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63. Which of the following statements is most correct? A. firms with relatively low debt ratios have higher expected returns when the business is good. B. firms with relatively low debt ratios are exposed to risk of loss when the business is poor. C. firms with relatively high debt ratios have higher expected returns when the business is bad. D. firms with relatively high debt ratios have higher expected returns when the business is good. E. none of the above. 64. All other things constant, an increase in a firm's profit margin would 65. Which of the following statements is correct? 66. Pepsi Corporation's current ratio is 0.5, while Coke Company's current ratio is 1.5. Both firms want to "window dress" their coming end-of-year financial statements. As part of their window dressing strategy, each firm will double its current liabilities by adding short-term debt and placing the funds obtained in the cash account. Which of the statements below best describes the actual results of these transactions?
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67. The Charleston Company is a relatively small, privately owned firm. Last year the company had after-tax income of $15,000, and 10,000 shares were outstanding. The owners were trying to determine the market value for the stock, prior to taking the company public. A similar firm which is publicly traded had a price/earnings ratio of 5.0. Using only the information given, estimate the market value of one share of Charleston's stock. A. $10.00 B. $7.50 C. $5.00 D. $2.50 E. $1.50
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