# PE ratio, common size %, current ratio, effective IR, CD,

21. A high price-earnings ratio can best be interpreted to mean that a firm:

a. pays higher dividends per share than most comparable firms.

b. has relatively high earnings per share as compared to their peers.

c. currently provides less net income per dollar paid for one share of stock than most other firms.

d. is guaranteed to have higher earnings per share in the near future based on the high current growth rate of the firm.

e. is growing at a rapid rate and that all of the net earnings are being distributed to shareholders in the form of dividends.

22. The Roadway Tire Store has net income of $67,200, total assets of $480,000, total equity of $230,000, and total sales of $676,000. What is the common-size percentage for the net income?

a. 7.65 percent

b. 10.54 percent

c. 14.00 percent

d. 9.94 percent

e. 29.22 percent

23. Sarah's Bakery has total assets of $214,600, long-term debt of $52,700, total equity of $119,500, fixed assets of $164,400, and sales of $241,900. The profit margin is 6 percent. What is the current ratio?

a. 0.77

b. 1.79

c. 2.18

d. 4.07

e. 1.18

24. You plan to invest some money in a bank account. Which of the following banks provides you with the highest effective rate of interest?

a. Bank 1; 6.1% with annual compounding.

b. Bank 2; 6.0% with monthly compounding.

c. Bank 3; 6.0% with annual compounding.

d. Bank 4; 6.0% with quarterly compounding.

e. Bank 5; 6.0% with daily (365-day) compounding.

25. Suppose you have $2,000 and plan to purchase a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually. How much will you have when the CD matures?

a. $3,754.27

b. $3,941.99

c. $4,139.09

d. $4,346.04

e. $4,563.34

#### Solution Summary

The solution answers finance questions related to PE ratio, common size percentage, current ratio, effective interest rate, CD.