Exam 3: Financial Analysis

is the firm's debt ratio?

year Vaughn Corp.had sales of $315,000 and a net income of $17,832, and its year-end assets were $210,000.The firm's total-debt-to-total-assets ratio was 42.5%.Based on the Du Pont equation, what was Vaughn's ROE?

though Firm A's current ratio exceeds that of Firm B, Firm B's quick ratio might exceed that of A.However, if A's quick ratio exceeds B's, then we can be certain that A's current ratio is also larger than that of B.

is the firm's EBITDA coverage?

inventory turnover ratio and days sales outstanding (DSO) are two ratios that are used to assess how effectively a firm is managing its assets.

Ziebart Corp.'s EBITDA last year was $390,000 (= EBIT + depreciation + amortization), its interest charges were $9,500, it had to repay $26,000 of long-term debt, and it had to make a payment of $17,400 under a long-term lease.The firm had no amortization charges.What was the EBITDA coverage ratio?

Although a full liquidity analysis requires the use of a cash budget, the current and quick ratios provide fast and easy-to-use measures of a firm's liquidity position.

is the firm's quick ratio?

Walter Industries' current ratio is 0.5.Considered alone, which of the following actions would increase the company's current ratio?

Profitability ratios show the combined effects of liquidity, asset management, and debt management on operating results.

Industries has sales of $100,000 and accounts receivable of $11,500, and it gives its customers 30 days to pay.The industry average DSO is 27 days, based on a 365-day year.If the company changes its credit and collection policy sufficiently to cause its DSO to fall to the industry average, and if it earns 8.0% on any cash freed-up by this change, how would that affect its net income, assuming other things are held constant?

Lindley Corp.'s stock price at the end of last year was $33.50, and its book value per share was $25.00.What was its market/book ratio?

Market value ratios provide management with an indication of how investors view the firm's past performance and especially its future prospects.

"apparent," but not the "true," financial position of a company whose sales are seasonal can differ dramatically, depending on the time of year when the financial statements are constructed.

Which of the following would indicate an improvement in a company's financial position, holding other things constant?

inventory turnover and current ratio are related.The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

management ratios show the extent to which a firm's managers are attempting to magnify returns on owners' capital through the use of financial leverage.

year Mason Inc.had a total assets turnover of 1.33 and an equity multiplier of 1.75.Its sales were $195,000 and its net income was $10,549.The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $5,250 without changing its sales, assets, or capital structure.Had it cut costs and increased its net income in this amount, by how much would the ROE have changed?

Orono Corp.'s sales last year were $435,000, its operating costs were $362,500, and its interest charges were $12,500.What was the firm's times interest earned (TIE) ratio?

times-interest-earned ratio is one, but not the only, indication of a firm's ability to meet its long-term and short-term debt obligations.