firat

14. I got this answer correct, but mostly due to luck. I calculated the operating income/sales ratio as EBIT/sales and also did the LTD/capitalization ratio. I saw these two were improving, but I knew both of these answers couldn’t be right at the same time. I came to the conclusion that EBIT/Sales isn’t a very reliable indicator when determining credit quality, especially since it is before interest. Is it nice to know? Yes. But it probably wouldn’t be able to tell us whether or not the company is able to pay off its debt.
25. Futures price
36. I got this question wrong because I calculated NCI using the full goodwill method. Your assumptions are correct.
45. The loan is an interest only loan, which is presented in the following sentence: “Scott learns that the equipment is to be financed entirely with a loan at 12%, with interest paid annually for five years and the full principal paid at the end of the fifth year.”
60. I got this question wrong too and spent a lot of time going back and forth on the first statement. Basically, if a firm is showing an upward trend in FCFE and not increasing their dividends, there lies an inconsistency between profitability and dividend payouts. Therefore, the DDM model should be avoided.