Answer the following statements true (T) or false (F)
1. Return on equity is a measure of profitability.
2. The formula for return on equity is net income divided by average Stockholders' Equity.
3. The return on equity for a company that has sales of $50,000, net income of $25,000 and average Stockholders' Equity of $125,000 is 20%.
4. The return on equity for a company that has sales of $43,000, net income of $13,000, and average Stockholders' Equity of $88,000 would be 48.86%.
5. If a company's return on equity is 25.21%, this means that the company earned its stockholders net income of $25.21 per dollar invested.
1. TRUE
2. TRUE
3. TRUE
Explanation: net income/average stockholders' equity; ex: $25,000/$125,000 = 20%
4. FALSE
5. FALSE
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Which of the following statements regarding the Law of One Price is INCORRECT?
A) At any point in time, the price of two equivalent goods trading in different competitive markets will be the same. B) One useful consequence of the Law of One Price is that when evaluating costs and benefits to compute a net present value (NPV), we can use any competitive price to determine a cash value, without checking the price in all possible markets. C) If equivalent goods or securities trade simultaneously in different competitive markets, then they will trade for the same price in both markets. D) An important property of the Law of One Price is that it holds even in markets where arbitrage is possible.
A U.S. manager who is negotiating in China has difficulty getting his Chinese counterparts to agree to put the details of their new contract on paper. At the same time, the Chinese managers are frustrated at the U.S. manager’s insistence to clarify every detail. This conflict is can be partially attributed to:
a. the U.S. superiority in business interactions b. the Chinese not trusting the U.S. manager c. the difference in how the two cultures use context d. the differences in the two countries political systems
Active listening is an acquired skill.
Answer the following statement true (T) or false (F)
We can use ratios to help evaluate a firm's performance and financial position.
Answer the following statement true (T) or false (F)