Selected information from Able Company 抯 financial activities in the year 2001 is as follows:
Net Income was $720,000.
1,000,000 shares of common stock were outstanding on January 1.
1,000 shares of eight percent, $1,000 par value preferred shares were outstanding on
January 1 and dividends were paid in 2001.
The tax rate was 40 percent.
Dividends were paid in 2001.
The average market price per share was $20 in 2001.
6,000 shares of three percent $500 par value preferred shares, convertible into common
shares at a rate of 30 common shares for each preferred share, were outstanding for the entire
year.
Able 抯 diluted earnings per share (Diluted EPS) for 2001 was closest to:
A. $0.55.
B. $0.65.
C. $0.66.
D. $0.54.
Which of the following will most likely cause a movement along the short-run aggregate supply curve?
A. Companies expecting that the prices of their products will decrease relative to the general price level.
B. A decrease in general price level.
C. Depreciation of the country’s currency.
Bingham Corp.抯 income statements for the years ended December 31, 2000 and December
31, 2001 are as follows: (in $ millions)
2000 2001
Sales 100 150
Cost of Goods Sold (72) (100)
Gross Profit 28 50
Depreciation (10) (20)
Operating Profit (EBIT) 18 30
Interest Expense (5) (6)
Earnings Before Taxes 13 24
Income Taxes (5) (11)
Earnings After Taxes 8 13
Balance Sheets for these years showed that total assets were $100 million and total equity
was $35 million on December 31, 2000, and total assets were $118 million and total equity
was $40 million on December 31, 2001. Which component of the traditional Du Pont equation
explains more of Bingham Corp 抯 financial improvement than any other component of the
equation?
A. Net Profit Margin.
B. Equity Multiplier.
C. Asset Turnover.
D. Financial Leverage Multiplier.