Question 1

Which of the following is the primary objective in most financial statement analysis?

Accepted Answer

A)   to value a firm's equity securities.
B)   to look for unrecorded liabilities.
C)   to establish a firm's strategy within the industry.
D)   to define markets for the firm.

Question 2

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

Accepted Answer

A)   low risk focus, low risk focus
B)   retail customer focus, wholesale customer focus
C)   product differentiation, low-cost leadership
D)   low operating leverage, high operating leverage

Question 3

Which of the following are better indicated by percentage change statements than common-size statements?

Accepted Answer

A)   monetary changes
B)   profitability
C)   stability
D)   growth and decline

Question 4

Return on common equity can be disaggregated into three components,which of the three is not one of the components?

Accepted Answer

A)   Assets Turnover ratio
B)   Profit Margin ratio
C)   Debt to Equity ratio
D)   Capital Structure Leverage ratio

Question 5

Sensitron and Douglas Tools manufacture and market power tools and accessories.Sensitron targets customers in the professional contractor market,while Douglas Tools focuses on home users and professionals.Selected financial data for the companies appears below.
  Required:
1.Calculate the accounts receivable turnover ratio for each firm for year 2010,2009,2008.
2.Suggest reasons for the differences in the accounts receivable turnover ratios for these two firms.

Accepted Answer

1.

2.
The main reason for t...

Question 6

Ramos Company Ramos Company included the following information in its annual report:
 Refer to the information for Ramos Company.In a common size income statement for 2009,the cost of goods sold are expressed as:

Accepted Answer

A)   64.3%
B)   40.0%
C)   87 %
D)   103%

Question 7

Carl Industries Carl Industries has condensed balance sheets as shown:
 Refer to the information for Carl Industries.In a percentage change balance sheet over the period of 2009 to 2011,what is the change in current assets?

Accepted Answer

A)   78.6%
B)   (27.3%) 
C)   (21.4%) 
D)   100%

Question 8

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

Accepted Answer

A)   1.31
B)   1
C)   1.58
D)   1.44

Question 9

Critics of EPS as a measure of profitability point out that it does not consider:

Accepted Answer

A)   simple capital structures.
B)   the amount of assets or capital required to generate a particular level of earnings.
C)   the deduction of preferred stock dividends from net income.
D)   Adjustments for dilutive securities and the adjustment to weighted average number of shares outstanding for complex capital structures.

Question 10

To calculate diluted EPS,the accountant does all of the following except:

Accepted Answer

A)   adds back to net income any compensation expense recognized on the employee stock options
B)   adds back any interest expense (net of taxes) on convertible bonds
C)   adds back any dividends on convertible preferred stock the firm subtracted in computing net income to common shareholders.
D)   enters only the net incremental shares issued (shares issued under options minus assumed shares repurchased) in the computation of diluted EPS.

Question 11

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

Accepted Answer

The answer of All else being equal,firms with high levels...

Question 12

Return on common shareholders' equity can be disaggregated into profit margin,asset turnover and __________________________________________________.

Accepted Answer

capital st...

Question 13

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 common shareholders' equity for Orca Industries is

Accepted Answer

A)   15.2%
B)   13.5%
C)   10%
D)   11.9%

Question 14

When calculating return on common stockholders' equity the financial analyst subtracts ________________________________________ from net income.

Accepted Answer

The answer of When calculating return on common stockholders' equity...

Question 15

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.
Compute the return on assets for Extreme Sports

Accepted Answer

A)   3.2%
B)   5.0%
C)   8.9%
D)   1.1%

Question 16

The return on assets measures operating performance independent of financing while the return on common shareholders' equity considers the cost of debt and preferred stock financing.Describe the relationship between ROA and ROCE in terms of where each dollar of return generated by assets is allocated.

Accepted Answer

The financial analyst allocates each dol...

Question 17

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 profit margin for computing ROA for Orca Industries is

Accepted Answer

A)   9.4%
B)   13.5%
C)   4.8%
D)   12.3%

Question 18

Which of the following scenarios is consistent with a increasing cost of goods sold to sales percentage and increasing inventory turnover

Accepted Answer

A)   Firm raises prices to increase its gross margin but inventory sells more slowly.
B)   Weak economic conditions lead to reduced demand for a firm's products, necessitating price reductions to move goods.
C)   Strong economic conditions lead to increased demand for a firm's products, allowing price increases.
D)   Firm shifts its product mix toward lower margin, faster moving products.

Question 19

Net Devices Inc. The following balance sheets and income statements are for Net Devices Inc.,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%.
BALANCE SHEETS
   Refer to the information for Net Devices Inc.What is the accounts receivable turnover ratio for Net Devices for 2011?

Accepted Answer

A)   24.65
B)   14.85
C)   14.81
D)   10.50

Question 20

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

Accepted Answer

A)   6.8%
B)   13.5%
C)   10%
D)   12.3%

Exam 4: Profitability Analysis

Correct Answer
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The financial analyst allocates each dol...
View Answer

Return on common equity can be disaggregated into three components,which of the three is not one of the components?

Correct Answer
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Correct Answer
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1.

2.
The main reason for t...
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All else being equal,firms with high levels of ________________________________________ incur more risk in their operations and should earn higher rates of return.

Correct Answer
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Critics of EPS as a measure of profitability point out that it does not consider:

Correct Answer
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Correct Answer
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Ramos Company Ramos Company included the following information in its annual report: Refer to the information for Ramos Company.In a common size income statement for 2009,the cost of goods sold are expressed as:

Correct Answer
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Which of the following is the primary objective in most financial statement analysis?

Correct Answer
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Return on common shareholders' equity can be disaggregated into profit margin,asset turnover and __________________________________________________.

Correct Answer
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capital st...
View Answer

Which of the following are better indicated by percentage change statements than common-size statements?

Correct Answer
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When calculating return on common stockholders' equity the financial analyst subtracts ________________________________________ from net income.

Correct Answer
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Correct Answer
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To calculate diluted EPS,the accountant does all of the following except:

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

Correct Answer
verified

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

Correct Answer
verified

Carl Industries Carl Industries has condensed balance sheets as shown: Refer to the information for Carl Industries.In a percentage change balance sheet over the period of 2009 to 2011,what is the change in current assets?

Correct Answer
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Which of the following scenarios is consistent with a increasing cost of goods sold to sales percentage and increasing inventory turnover

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Exam 4: Profitability Analysis

Correct AnswerverifiedThe financial analyst allocates each dol...View AnswerShow Answer

Return on common equity can be disaggregated into three components,which of the three is not one of the components?

Correct AnswerverifiedShow Answer

Correct Answerverified1. 2.The main reason for t...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Critics of EPS as a measure of profitability point out that it does not consider:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Ramos Company Ramos Company included the following information in its annual report: Refer to the information for Ramos Company.In a common size income statement for 2009,the cost of goods sold are expressed as:

Correct AnswerverifiedShow Answer

Which of the following is the primary objective in most financial statement analysis?

Correct AnswerverifiedShow Answer

Return on common shareholders' equity can be disaggregated into profit margin,asset turnover and __________________________________________________.

Correct Answerverifiedcapital st...View AnswerShow Answer

Which of the following are better indicated by percentage change statements than common-size statements?

Correct AnswerverifiedShow Answer

When calculating return on common stockholders' equity the financial analyst subtracts ________________________________________ from net income.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To calculate diluted EPS,the accountant does all of the following except:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Carl Industries Carl Industries has condensed balance sheets as shown: Refer to the information for Carl Industries.In a percentage change balance sheet over the period of 2009 to 2011,what is the change in current assets?

Correct AnswerverifiedShow Answer

Which of the following scenarios is consistent with a increasing cost of goods sold to sales percentage and increasing inventory turnover

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified
The financial analyst allocates each dol...
View Answer

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1.

2.
The main reason for t...
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capital st...
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