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Exam 3: Analyzing Financial Statements

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Question 1

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Fancy Paws' year-end price on its common stock is $20. The firm has total assets of $40 million, the debt ratio is 40 percent, there is no preferred stock, and there are 2 million shares of common stock outstanding. Calculate the market-to-book ratio for Fancy Paws.

A) 0.47
B) 1.67
C) 8.00
D) 10.00

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Question 2

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Last year Umbrellas Unlimited Corporation had an ROE of 16.5 percent and a dividend payout ratio of 40 percent. What is the sustainable growth rate?

A) 13.17 percent
B) 10.99 percent
C) 27.50 percent
D) 32.93 percent

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Question 3

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Which ratio measures how many days inventory is held before the final product is sold?

You are thinking of investing in Ski Sports, Inc. You have only the following information on the firm at year-end 2018: net income = $50,000, total debt = $1 million, and debt ratio = 70 percent. What is Ski's ROE for 2018?

Calculate the times interest earned ratio for Tierre's Ts, Inc. using the following information. Sales = $200,000, cost of goods sold = $50,000, depreciation expense = $13,000, addition to retained earnings = $70,000, dividends per share = $0.50, tax rate = 30 percent, and number of shares of common stock outstanding = 1,000. Tierre's Ts has no preferred stock outstanding.

You are evaluating the balance sheet for Blue Jays Corporation. From the balance sheet you find the following balances: cash and marketable securities = $200,000, accounts receivable = $800,000, inventory = $1,000,000, accrued wages and taxes = $250,000, accounts payable = $400,000, and notes payable = $300,000. What are Blue Jays' current ratio, quick ratio, and cash ratio, respectively?

A corporation has a total asset turnover of 2 times, ROA of 12 percent and EM of 1.17. What is this firm's profit margin and debt ratio?

Which ratio measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm's debt?

Which ratio assesses how efficiently a firm uses its fixed assets?

Which of these statements is true?

What is the debt ratio for a firm with an equity multiplier of 3.5?

Which of these ratios measure the extent to which the firm uses debt (or financial leverage) versus equity to finance its assets?

Which statement(s) is/are true of PE ratios?

Zoe's Dog Toys, Inc. reported a debt to equity ratio of 0.5 times at the end of 2018. If the firm's total assets at year-end are $50 million, how much of their assets is financed with equity?

You have located the following information on Rock Company: debt ratio = 40 percent, capital intensity ratio = 2.25 times, profit margin = 8 percent, and dividend payout ratio = 25 percent. What is the sustainable growth rate for Rock?

Which of the following statements is correct?

A firm reported working capital of $5.5 million and fixed assets of $20 million. Its fixed asset turnover was 1.2 times. What was the firm's sales to working capital ratio?

Which of the following statements is correct?

To interpret financial ratios, managers, analysts, and investors use which of the following type of benchmarks?

A firm has EBIT of $300,000 and depreciation expense of $12,000. Fixed charges total $44,000. Interest expense totals $7,000. What is the firm's cash coverage ratio?