Question

QUESTION 11

1. What is return on assets?

   		It is net income / total equity.
   		It is sales / total assets.
   		It is net income / total assets.
   		It is sales / total equity.

1 points   

QUESTION 12

1. Nvidia has the net profit margin of 32.20% while the industry average net profit margin is 13.51%. Based on the findings,

   		Nvidia underperforms its peers in terms of leverage.
   		Nvidia underperforms its peers in terms of profitability.
   		Nvidia outperforms its peers in terms of leverage.
   		Nvidia outperforms its peers in terms of profitability.

1 points   

QUESTION 13

1. What are the two components for ROA in Du Pont Identity?

   		Net profit margin and equity multiplier
   		Inventory turnover and debt equity ratio
   		Total asset turnover and equity multiplier
   		Net profit margin and total asset turnover

1 points   

QUESTION 14

1. Which of the following statements about net profit margin is NOT true?

   		It is a measure of a firm’s profitability.
   		A Low profit margin is always a bad sign. We should avoid investing such companies.
   		It is net income / sales.
   		A high profit margin is desirable, when other things remain the same.

1 points   

QUESTION 15

1. AT&T has sales of $170,765 million, net income of $19,370 million, total equity of $184,089 million, and 7,300 million shares outstanding. Its current stock price is $38.50. Compute its market-to-book ratio.

   		1.65
   		1.53
   		2.65
   		14.53

Answer 1

1. Option (c) is correct

Return on assets = Net income / Total assets

2. Option (d) is correct

Net profit margin indicates the profitability of the company. Since Nvidia's net profit margin is higher than the industry average, so Nvidia outperforms the industry in terms of profitability.

3. Option (d) is correct

According to Du Pont identity, ROA is:

ROA = Net profit margin * Total asset turnover

4. Option (b) is the answer

A low profit margin is not always a bad sign.

5. Option (b) is correct

First we will calculate book value per share as below:

Book value per share = Total equity / Total number of shares

Book value per share = $184089 / 7300 = $25.22

Now,

Market to book ratio = Market price per share / Book value per share

Market to book ratio = $38.5 / $25.22 = 1.53