Exam 15: Company Analysis

Calculate the required return on DCM Inc.'s stock if its current price is $35 per share, next year's expected dividend is $2.00 per share, its return on equity is 12 percent, and its dividend payout ratio is 55 percent.

Assume the following for Mighty Manufacturing Company: Operating efficiency = 0.1 Net income = $50,000,000 Net income margin = 0.05 Total asset turnover = 3 Leverage = 1.5 Retention rate = 0.3 (a) Calculate ROA. (b) Calculate ROE. (c) Find the growth rate of dividends.

The key item for investors on the income statement is:

A company with a return on equity (ROE) that equals its required return on equity has a justifiable P/B equal to 1.

Earnings derived under GAAP and shown on the income statement are known as:

If a firm's ROA and ROE are equal, it can be concluded that the firm is:

The P/E ratio can be expected to change as the expected dividend payout ratio changes.

What is the internal (sustainable) growth rate? How is it calculated?

One way to calculate EPS is:

What are "earnings surprises?" How do they affect stock prices?

Other things equal, if the:

How could unexpected inflation affect the P/E ratio?

Firm ABC and Firm XYZ both have ROEs of 18%; however, Firm ABC has a much higher ROA than Firm XYZ. Which of the following do we know to be true? Relative to Firm ABC, Firm XYZ has a higher:

Don Jorge Shipping Inc. has net income of $40 million, total assets of $300 million, and sales of $800 million. Its equity is $190 million. (a) Calculate ROA. (b) Calculate ROE. (c) If the book value per share is $7.00, what is EPS?

Which of the following statements regarding retained earnings is not true?

International Financial Reporting Standards (IFRS) are used by most countries.

Which of the following is true regarding earnings estimates?

When an investor buys a share of common stock the investor buys a claim of ownership. How is this claim represented on the balance sheet?

Which of the following mandated that firms must submit an annual report to the SEC outlining the effectiveness of their internal accounting controls?

If a company's net income margin decreases, a company can maintain its ROA by increasing its asset turnover.