D351 Functions of Human Resource Management - Set 2 - Part 2

Correct Answer: Net Income / Total Sales

Net profit margin is calculated by dividing net income by total sales, showing the percentage of revenue that becomes profit.

Correct Answer: Investing in a wide variety of assets to reduce risk

Diversification involves spreading investments across different asset classes to reduce exposure to any single risk.

Correct Answer: Corporate bonds

Corporate bonds are a long term financing method used by companies to raise capital.

Correct Answer: The mix of a companys debt and equity financing

Capital structure refers to the proportion of debt and equity that a company uses to finance its operations.

Correct Answer: The company has twice as much debt as equity

A debt to equity ratio of 2:1 means the company is financing twice as much with debt compared to equity.

Correct Answer: To show how much revenue a company earned over a period of time

The income statement reports a companys financial performance by showing its revenues, expenses, and profits over a specific period.

Correct Answer: Costs that remain constant regardless of production levels

Fixed costs do not change with the level of production or sales, such as rent or salaries.

Correct Answer: It decreases net income

Depreciation is a non cash expense that reduces net income by allocating the cost of a tangible asset over its useful life.

Correct Answer: $60

Annual interest payment = Coupon rate Face value. In this case: 6% $1,000 = $60.

Correct Answer: To estimate future financial needs and performance

Financial forecasting is used to predict a companys future revenue, expenses, and capital needs based on historical data and assumptions.

Correct Answer: Asset turnover ratio

The asset turnover ratio measures how efficiently a company uses its assets to generate sales.

Correct Answer: $50,000

The company raises $50,000 by issuing 1,000 shares at $50 each (1,000 $50 = $50,000).

Correct Answer: A companys ability to meet short-term obligations without relying on inventory

The quick ratio is a measure of liquidity, excluding inventory, to assess a companys ability to cover its short term liabilities.

Correct Answer: To decide which long term projects to invest in

Capital budgeting involves evaluating and selecting long term projects that are expected to generate future benefits.

Correct Answer: The process of earning interest on both the initial investment and previously earned interest

Compounding occurs when interest is earned on both the original principal and the accumulated interest from previous periods.

Correct Answer: Operating income divided by total revenue

Operating margin measures the percentage of revenue that remains after paying for operating expenses.

Correct Answer: 25%

Percentage increase = (New price - Old price) / Old price 100. In this case: ($30 - $25) / $25 100 = 25%.

Correct Answer: It decreases EPS

Issuing new shares increases the number of shares outstanding, which reduces the companys earnings per share (EPS).

Correct Answer: 0.25

Cash ratio = Cash and cash equivalents / Total current liabilities. In this case: $100,000 / $400,000 = 0.25.

Correct Answer: The companys market price per share divided by its book value per share

The P/B ratio compares a companys market value to its book value, indicating whether the stock is overvalued or undervalued.