FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 4: Profitability Analysis

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

The statutory tax rate differs from a firm's average tax rate due to which of the following reasons

A) the statutory tax rate is a marginal tax rate.
B) some expenses are included in book income but do not enter into taxable income.
C) the average tax rate is for a period of three years.
D) the statutory tax rate does not effect GAAP measures of revenues and expenses.

Correct Answer

verified

Show Answer

Question 22

Short Answer

Review LaterAdd Note

Review Later

When an analyst uses measures of past profitability to forecast the firm's future profitability the expectation is that those revenues,gains,expenses and losses will ____________________.

Correct Answer

verified

Show Answer

Question 23

Short Answer

Review LaterAdd Note

All else being equal,firms with high levels of ________________________________________ incur more risk in their operations and should earn higher rates of return.

Return on assets can be a misleading ratio when analyzing technology firms because two important assets,______________________________ and ______________________________ do not appear on their balance sheets

Firms with high operating leverage have a higher proportion of _________________________ in their cost structure.

Hall and Porter argue that firms have two generic alternative strategies for any particular product.These strategies are

One important difference between return on assets (ROA) and return on common shareholder's equity (ROCE) is

Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%. Income Statement For the year ended December 31, 2011 -Refer to the information for Orca Industries.Orca's accounts receivable turnover is (assume that Orca makes all sales on account)

Extreme Sports Company and All Sports Corporation Below is financial information for two sporting goods retailers. Extreme Sports Company operates a retail business and franchising business. At the end 2011, Extreme Sports had 263 Company-owned and 120 franchise-operated retail stores. Extreme's stores are located in suburban, strip mall and regional mall locations, the company operates in 32 states. All Sports Corporation sells sporting goods and related products at over 2,500 Company-operated retail stores. Selected Data for All Sports and Extreme Sports (amounts in millions) -Refer to the information for Extreme Sports Company and All Sports Corporation. Calculate All Sports' inventory turnover ratio

Freedom Company reported net income for 2010 of $2,031 million on sales of $25,600 million.Interest expense for 2010 was $235 million,and minority interest was $344 million for 2010.The income tax rate is 40 percent.Total assets were $10,800 million at the beginning of 2010 and $14,874 million at the end of 2010.Compute the rate of ROA for 2010 and disaggregate ROA into profit margin for ROA and asset turnover components.

Another term for earnings power is

Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%. Income Statement For the year ended December 31, 2011 -Refer to the information for Orca Industries.The return on assets for Orca Industries is

The ____________________ effect of interest expense on net income equals one minus the marginal tax rate times the interest expense.

When calculating Basic earnings per share net income is adjusted by____________

Krane,Inc.reported net income (amounts in thousands)of $619,700 for Year 4.Included in net income was income tax expense of $10,400.During the year the company paid the preferred shareholders $9,000 in dividends.The weighted average of common shares outstanding during Year 4 was 468,810 shares.Krane Inc.,subtracted interest expense net of tax saving on convertible debt of $4,820.If the convertible debt had been converted into common stock,it would have increased the weighted average common shares outstanding by 20,905 shares.Krane Inc.,has outstanding stock options that,if exercised,would increase the weighted average of common shares outstanding by 7,335 shares. REQUIRED: Compute basic and diluted earnings per share for Year 4,showing supporting computations.

Inventory turnover is calculated by dividing ________________________________________ by average inventories.

Carridine Company reported net income of $1,903 on revenues of $55,618 for Year4.Interest expense totaled $459,and preferred dividends totaled $13.5.Average total assets for Year 4 were $17,500.The income tax rate is 40 percent.Average preferred shareholders' equity totaled $250,and average common shareholders' equity totaled $7,500.Assume that all the following amounts are in thousands. REQUIRED:a.Compute the rate of ROA.Disaggregate ROA into profit margin for ROA and assets turnover components. b.Compute the rate of ROCE.Disaggregate ROCE into profit margin for ROCE,assets turnover,and capital leverage ratio components. c.Calculate the amount of net income to common shareholders derived from the excess return on creditors' capital,the excess return on preferred shareholders' capital, and the return on common shareholders' capital.

Firms and industries characterized by heavy fixed capacity costs and lengthy periods required to add new capacity operate under a ___________________________________.

Which of the following would be considered a committed fixed cost ( a cost that is incurred regardless of the level of activity during the period) ?

Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%. Income Statement For the year ended December 31, 2011 -Refer to the information for Orca Industries.Orca's asset turnover is