1) Management that wanted to increase financial leverage of its firm would:
i) Raise extra capital by selling common stock
ii) Use excess cash to buy favoured stock for treasury
iii) Raise extra capital by selling fixed interest rate long-term bonds
iv) Try to increase its ROI by increasing asset turnover
2) When firm has financial leverage:
i) ROI will be greater than ROE
ii) ROI will generally be less than it would be without leverage
iii) Risk is greater than if there is not any leverage
iv) Firm will always have higher ROE than it would without leverage
3) Knowledge about behaviour pattern of cost is significant to understanding effect on net income of change in sales volume as sales volume changes:
i) Net income will change proportionately
ii) Effect on net income will depend on the behaviour pattern of various costs
iii) Fixed costs will rise proportionately
iv) Variable costs will not change
4) Management accounting is:
i) Highly technical subject that people in personnel or engineering muts not be expected to understand
ii) Performed by individuals who rarely work with people in other functional areas of organization
iii) Principal activity involved in finding goals and objectives of entity
iv) Activity which gets involved with virtually all of other functional areas of the organization
5) When cost behaviour pattern has been identified as fixed at certain volume of activity:
i) Any change in volume will most likely cause cost to change
ii) It is suitable to express cost on per unit of activity basis
iii) Total cost will not change even if the volume of activity changes substantially
iv) Total cost may change if the volume of activity changes substantially