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Exam 3: Financial Statements Analysis and Long-Term Planning

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Question 41

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The higher the inventory turnover measure, the:

A) faster a firm sells its inventory.
B) faster a firm collects payment on its sales.
C) longer it takes a firm to sell its inventory.
D) greater the amount of inventory held by a firm.
E) lesser the amount of inventory held by a firm.

F) A) and B)
G) A) and C)

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Question 42

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The _____ breaks down return on equity into three component parts.

A) Du Pont identity
B) return on assets
C) statement of cash flows
D) asset turnover ratio
E) equity multiplier

F) B) and E)
G) B) and D)

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Question 43

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The three parts of the Du Pont identity can be generally described as: I.operating efficiency, asset use efficiency and firm profitability. II.financial leverage, operating efficiency and asset use efficiency. III.the equity multiplier, the profit margin and the total asset turnover. IV.the debt-equity ratio, the capital intensity ratio and the profit margin.

Projected future financial statements are called:

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Windswept, Inc. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 2008 Income Statement $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ ($ in millions) $\begin{array}{c}\begin{array}{lll} \text {Net sales } \\ \text { Less: Cost of goods sold } &&\\ \text { Less: Depreciation } &\\ \text {Earnings before interest and taxes } &\\ \text { Less: Interest paid } &\\ \text {Taxable Income } &\\ \text {Less: Taxes } &\\ \text { Net income } &\\\end{array}\begin{array}{r}\$ 8,450 \\7,240 \\\underline{400} \\ 810 \\\underline{ 70} \\ \$ 740 \\\underline{ 259} \\\underline{ \$ 481}\end{array}\end{array}$ -Refer to the above TableWhat is the return on equity for 2008?

A firm has sales of $1,500, net income of $100, total assets of $1,000, and total equity of $700.Interest expense is $50.What is the common-size statement value of the interest expense?

Samuelson's has a debt-equity ratio of 40%, sales of $8,000, net income of $600, and total debt of $2,400.What is the return on equity?

List and interpret two liquidity ratios.

The equity multiplier ratio is measured as total:

A firm has a total debt ratio of .47.This means that that firm has 47 cents in debt for every:

The financial ratio days' sales in inventory is measured as:

Katelyn's Kites has net income of $240 and total equity of $2,000.The debt-equity ratio is 1.0 and the plowback ratio is 40%.What is the internal growth rate?

Which one of the following statements is correct?

Financial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as _____ ratios.

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Windswept, Inc. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 2008 Income Statement $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ ($ in millions) $\begin{array}{c}\begin{array}{lll} \text {Net sales } \\ \text { Less: Cost of goods sold } &&\\ \text { Less: Depreciation } &\\ \text {Earnings before interest and taxes } &\\ \text { Less: Interest paid } &\\ \text {Taxable Income } &\\ \text {Less: Taxes } &\\ \text { Net income } &\\\end{array}\begin{array}{r}\$ 8,450 \\7,240 \\\underline{400} \\ 810 \\\underline{ 70} \\ \$ 740 \\\underline{ 259} \\\underline{ \$ 481}\end{array}\end{array}$ -Refer to the above TableWhat is the cash coverage ratio for 2008?

Neal's Nails has an 11% return on assets and a 30% dividend payout ratio.What is the internal growth rate?

Rosita's Restaurant has sales of $4,500, total debt of $1,300, total equity of $2,400, and a profit margin of 5%.What is the return on assets?

A firm has days' sales in inventory of 105 days, an average collection period of 35 days, and takes 42 days, on average, to pay its accounts payable.Taken together, what do these three figures imply about the firm's operations and its cash flows?

Which one of the following statements is correct concerning ratio analysis?

To calculate sustainable growth rate without using return on equity, the analyst needs the: