By using a graphic organizer of your choice, create a visual graphic that visually explains your response to the following: A friend has mentioned that she has read that the following variables can be used to predict bankruptcy: (a) the company debt ratio; (b) the interest coverage; (c) the amount of cash relative to sales or assets; (d) the return on assets; (e) the market-to-book ratio; (f) the recent return on the stock; and (g) the volatility of the stock returns. The problem is, she can't remember whether a high value of each variable implies a high or a low probability of bankruptcy. Help your friend remember the information she needs to know by creating a visual graphic

By using a graphic organizer of your choice, create a visual graphic that visually explains your response to the following: A friend has mentioned that she has read that the following variables can be used to predict bankruptcy: (a) the company debt ratio; (b) the interest coverage; (c) the amount of cash relative to sales or assets; (d) the return on assets; (e) the market-to-book ratio; (f) the recent return on the stock; and (g) the volatility of the stock returns. The problem is, she can't remember whether a high value of each variable implies a high or a low probability of bankruptcy. Help your friend remember the information she needs to know by creating a visual graphic

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter5: Risk Analysis

Section: Chapter Questions

Problem 12QE: Altmans bankruptcy risk model utilizes the values of the variables at a particular point in time...

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Altmans bankruptcy risk model utilizes the values of the variables at a particular point in time (balance sheet variables) or for a period of time (income statement values). An alternative would be to use changes in balance sheet or income statement amounts. Why might the levels of values in Altmans model be more appropriate than changes for predicting bankruptcy?
What information can best be elicited from a receivable ratio? A. company performance with current debt collection B. credit extension effect on cash sales C. likelihood of future customer bankruptcy filings D. an increase in future credit sales to current customers
Describe why an Investor would use Profitability Ratio’s? What are the following ratio's measuring (i) Return on Assets, (ii) Return on Equity, (iii) Profit Margin. Describe why a CEO would use Activity Ratio’s? What are the following ratio’s measuring (i) Days Receivables Outstanding, (ii) Inventory Turnover. Describe why a Bank would use Solvency Ratio’s? What are the following ratio’s measuring (i) Current Ratio, (ii) Acid-Test, (iii) Debt Ratio, (iv) Debt to Equity Ratio, Times Interest Earned ratio
Which of the following is not a common way that managers use the balance sheet? To analyze the balance between debt and common stock financing To determine if the cash balance is sufficient for future needs To analyze the balance of accounts receivable on the last day of the accounting period To analyze the balances of assets, liabilities, and stockholders' equity throughout the accounting period
find assets, liabilities, and stockholders equity
What is the total liabilities, please break down.
Indicate whether the following statements are (True) or (False) and correct the false statements: The financial manager prepares financial statements that recognize revenue at the point of sale and expenses when incurred. Capital markets are for investors who want a safe temporary place to deposit funds where they can earn interest and for borrowers who have a short term need for funds. Common stock dividends paid to stockholders are equal to the earnings available for common stockholders divided by the number of shares of common stock outstanding.
Most of the users of financial statements are concerned about what will happen in the future. Explain the statement with an example?
Which of the following statement is correct? Select one: O a. Return on assets is the ratio of net income after interest expense to total assets O b. All options are correct statement C. Average collection period is the average number of times it takes for the company's customers to pay their bills o d. Increase in the debt ratio indicate more reliance on debt as a source of financing
Which of the following pairs of financial statement analysis tool will be given more emphasis by a firm that is considering whether to grant trade credit or sell on account to a new client? a. Current and cash ratio b. Book value and price-to-earnings ratio c. Debt and debt-to-equity ratio d. Return on sales and return on asset
Which of the following are ways companies could use accounts receivables for earnings management? Select all that apply. Overestimate uncollectibles to reduce earnings (cookie jar reserve) Underestimate uncollectibles to reduce earnings (cookie jar reserve) Underestimate uncollectibles to increase earnings Overestimate uncollectibles to increase earnings
Explain why balance sheet accounts are generally “averaged” and income statement figures are just lifted from the income statement when using them as factors in a particular financial statement ratio? How do the DuPont technique helps the firm’s managers to further analyze its returns?