Exam 4: Profitability Analysis

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

The computation of the additional shares to be issued on the exercise of stock options assumes that the firm would repurchase common shares on the open market using an Amount equal to the sum of all the following except:

One problem with using EPS as a measure of profitability is that it does not consider the amount of ____________________ or ____________________ required to generate a particular level of earnings.

Inventory turnover is calculated by dividing ________________________________________ by average inventories.

Adjustments for dilutive securities and the adjustment to weighted average number of shares outstanding presumes that the dilutive securities are converted to common shares

Firms with high levels of operating leverage experience which of the following in comparison to firms with low levels of operating leverage

Operating income is negative in an amount equal to _________________________ when revenues are zero.

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

Ramos Company included the following information in its annual report: 2011 2010 2009 Sales \ 178,400 \ 162,500 \ 155,500 Cost of goods sold 115,000 102,500 100,000 Operating expenses 50,000 50,000 45,000 Net incoume 13,400 10,000 10,500 - Refer to the information for Ramos Company. In a common size income statement for 2009, the cost of goods sold are expressed as:

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%. Balance Sheet 2011 2010 Assets: Cash \1 0,000 \6 ,000 Accounts Receivable (net) 6,000 1,500 Inventory 8,000 10,000 Long-lived assets 12,000 11,000 Less: Accumulated depreciation Total assets Liabilities and Stockholders' Equity: Accounts payable \5 ,000 \6 ,000 Deferred revenues 1,000 2,000 Long-term note payable 10,000 10,000 Less: Discount on note payable (800) (1,000) Common stock 12,000 6,000 Retained earnings Total liabilities and stockholders' equity Income Statement For the year ended December 31, 2011 Revenues \4 2,000 Cost of goods sold (24,000) Depreciation expense (2,000) Interest expense (3,000) Bad debt expense (2,000) Other expense (including income taxes) Net income - Refer to the information for Orca Industries. The profit margin for computing ROA for Orca Industries is

Multiples of EPSto value firms are referred to as.

Discuss the economic characteristics of firms that have the following mix of profit margin and asset turnover. In addition provide an example of an industry that would have the relevant profit margin asset turnover mix: A. High profit margin and low asset turnover. B. Low profit margin and high asset turnover

Which of the following industries would you expect to have, on average, high asset turnover and low profit margin?

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

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%. Balance Sheet 2011 2010 Assets: Cash \1 0,000 \6 ,000 Accounts Receivable (net) 6,000 1,500 Inventory 8,000 10,000 Long-lived assets 12,000 11,000 Less: Accumulated depreciation Total assets Liabilities and Stockholders' Equity: Accounts payable \5 ,000 \6 ,000 Deferred revenues 1,000 2,000 Long-term note payable 10,000 10,000 Less: Discount on note payable (800) (1,000) Common stock 12,000 6,000 Retained earnings Total liabilities and stockholders' equity Income Statement For the year ended December 31, 2011 Revenues \4 2,000 Cost of goods sold (24,000) Depreciation expense (2,000) Interest expense (3,000) Bad debt expense (2,000) Other expense (including income taxes) Net income Refer to the information for Orca Industries. The return on assets for Orca Industries is

The profit margin for ROA indicates the ability of a firm to generate earnings for a particular level of

Return on assets will likely differ across firms and across time. Three elements of risk that will help explain these differences are operating leverage, ___________________________________, and stage and length of product life cycle.

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) All Sports Extreine Sport Sales \ 5,320 \ 1,344 Cost of GoodsSold 3,897 887 Interest Expense 138 43 Net Income 212 33 Average Inventory 998 286 Average Fixed Assets 1,163 130 Average Total Assets 2,472 662 Average Tax Rate 40\% 40\% - Refer to the information for Extreme Sports Company and All Sports Corporation. Calculate All Sports' inventory turnover ratio

Firms with ____________________ levels of operating leverage experience greater variability in their return on assets.

Carl Industries has condensed balance sheets as shown: 2011 2010 2009 Assets: Curent assets \ 55,000 \ 56,500 \ 70,000 Plant \& equipment net 495,000 410,000 440,000 Intangible assets, net 20,000 27,500 40,000 Total assets \ 570,000 \ 494,000 \ 550,000 Liabilities \& Stckckolders' Equity: Curent liabilities \ 40,000 \ 35,000 \ 32,500 Long term liabilities 395,000 310,000 375,000 Stoclcholders' equity 135,000 149,000 142,500 Total liabilities \& equity \ 570,000 \ 494,000 \ 550,000 - 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 long-term liabilities?