04 - Hampton

Investors and financial analysts wanting to evaluate the operation efficiency of a firm's managers would probably look primarily at the firm's A. Leverage/debt ratios. market value ratios. 11. B. asset management ratios. D. liquidity ratios. C. 12. in a non-interest bearing account, this will tend to lower the firm's A. profit margin. B. return on equity. C. debt ratio. Other things held constant, if a firm holds cash balances in excess of their optimal level D. current ratio.

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Ethical Issue: Moss Exports is having a bad year. Net Income is only $60,000. Also, two important overseas customers are falling behind in their payments to Moss, and Moss's Accounts Receivable are ballooning (these two customers owe Moss $80,000 combined). The company desperately needs a loan. The Moss Exports Board of Directors is considering ways to put the best face on the company's financial statements. Moss's bank closely examines cash flow from operating activities. Daniel Peavey, Moss's Controller, suggests reclassifying the receivables from the two overseas customers as long-term assets. He explains to the Board that removing the $80,000 increase in Accounts Receivable from current assets will increase the net cash provided by operations.This approach may help get Moss the loan. 1. Using only the amounts given, compute net cash provided by operations, both without and with the reclassification of the receivables. Which reporting makes Moss look better? In showing your math,…

The ratio, Days Sales Outstanding (DSO) measures how quickly a company pays its vendors and suppliers.  Select one: True False A company is using the same financial ratios to measure their performance across multiple divisions which are in different industry.  This approach provides the company with the most accurate trend analysis.   Select one: True False Examples of financial leverage include all of the below except for (select the one that does not apply): a. Issuing stock   b. Equipment Loan  c. Working Capital Line of Credit  d. Business Credit Card  e. A private loan from family which must be repaid

1. How is it possible for a firm to be profitable and still go bankrupt? Select one: a. The firm has positive net income but has failed to generate cash from operations. b. Earnings have increased more rapidly than sales. c. Sales have not improved even though credit policies have been eased. d. Net income has been adjusted for inflation.   2. Which ratio or ratios measure the overall efficiency of the firm in managing its investment in assets and in generating return to shareholders? Select one: a. Gross profit margin and net profit margin. b. Return on investment and return on equity. c. Total asset turnover and operating profit margin. d. Return on investment.   3. What is the first step in an analysis of financial statements? Select one: a. Specify the objectives of the analysis. b. Do a common size analysis. c. Check references containing financial information. d. Check the auditor’s report.   4. What information does the auditor’s report contain? Select one: a. The results of…

Financial Ratio Analysis.  A financial ratio by itself tells us little about a company since financial ratios vary a great deal across industries.  There are two basic methods for analyzing financial ratios for a company: time trend analysis and peer group analysis.  Why might each of these analysis methods be useful?  What does each tell you about the company’s financial health?

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Debt management ratios measure how effectively the firm uses its plant and equipment. Which of the following statements is CORRECT? The use of debt will always decrease a firm's ROE. O Debt exposes the firm to more financial risk than if it was financed only with equity. Firms with relatively high debt ratios typically have lower expected returns when the economy is normal, but experience higher returns and possibly face bankruptcy if the economy goes into a recession. The TIE ratio measures the extent to which operating income can increase before the firm is unable to meet its annual interest costs.

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A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation. The firm has no lease payments but has a $3 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows: Industry Average Ratios   Current ratio 2 ×   Fixed assets turnover 6 × Debt-to-capital ratio 19 %   Total assets turnover 3 × Times interest earned 7 ×   Profit margin 5.75 % EBITDA coverage 9 ×   Return on total assets 17.25 % Inventory turnover 7 ×   Return on common equity 19.40 % Days sales outstandinga 23 days   Return on invested capital 17.30 % aCalculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars)   Cash and equivalents $ 77   Accounts payable $ 48 Accounts receivables   72   Other current liabilities   29 Inventories   178   Notes payable   58    Total current assets $ 327…

Which of the following statements is usually correct? A low receivables turnover is good for the business The lower the total debt-to-equity ratio, the lower the financial risk for a firm The higher the tax rate for a firm, the lower the interest coverage ratio An increase in net profit margin with no change in sales or assets means a poor ROI

Which of the following is the most correct? A. In reference to the time value of money, the present value is always labeled as t=1 B. Negative MVAs indicate that a company's executives are managing the expenses well C. Nominal rates, or annual percentage rates, always equal the effective annual rate D. A strong ROE always indicates a strong year for a company E. Firms should generally try to minimize their days' sales outstanding in order to access their receivables at fast rates.

A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation. The firm has no lease payments but has a $1 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows: Current ratio Debt-to-capital ratio Times interest earned EBITDA coverage Inventory turnover Cash and equivalents Accounts receivables Inventories Total current assets Gross fixed assets Days sales outstandinga aCalculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) $78 Accounts payable 74 147 $299 Less depreciation Industry Average Ratios Net fixed assets. Total assets 2x 15% 5x 10x 9x 25days Fixed assets turnover Total assets turnover Profit margin Return on total assets Return on common equity Return on invested capital 216 55 $161 $460 Other current liabilities Notes payable Total current liabilities Long-term debt Total…

Canis Major Veterinary Supplies Inc. DuPont Analysis Ratios Calculation   Value Profitability ratios Numerator   Denominator     Gross profit margin (%)   /   =   Operating profit margin (%)   /   =   Net profit margin (%)   /   =   Return on equity (%)   /   =   Asset management ratio           Total assets turnover   /   =   Financial ratios           Equity multiplier   /   =       MADISON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Xavier would have been very disappointed in me if I had showed him my original work. So, now let’s switch topics and identify general strategies that could be used to positively affect Canis Major’s ROE.   YOU: OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company’s ROE?    Check all that…

D’Leon Inc. is a snack food (bakery) company that underwent major expansion in 2018.  Which of the following did NOT occur: Group of answer choices Suppliers are being paid late Sales fell as the company cut prices and lost market share Bank has threatened to cut off credit Inventories increased Company’s cash position weakened

A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation. The firm has no lease payments but has a $1 million sinking fund payment on its debt. The most recent Industry average ratios and the firm's financial statements are as follows: Current ratio Debt-to-capital ratio Times interest earned EBITDA coverage Inventory turnover Days sales outstanding *Calculation is based on a 365-day year. Cash and equivalents Accounts receivables Inventories Total current assets Gross fixed assets Less depreciation Industry Average Ratios Net fixed assets Total assets 2x 15% 5x 10x 9x Balance Sheet as of December 31, 2021 (millions of dollars) $ 78 Accounts payable 74 Other current liabilities Notes payable Taxes (25%) Net Income 25days 147 $299 216 55 $161 $460 Fixed assets turnover Profit margin Total assets turnover Equity multiplier Total assets turnover Profit margin Return on total assets Return on common…