Question 1

Refer to the information for Orca Industries . Orca's accounts receivable turnover is (assume that Orca makes all sales on account):

Accepted Answer

A)  7.0 
B)  .53 
C)  11.2 
D)  10 
A)  7.0 
B)  .53 
C)  11.2 
D)  10 C

Question 2

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

Accepted Answer

A)  Hotels 
B)  Grocery stores 
C)  Utilities 
D)  Oil and Gas extraction 
A)  Hotels 
B)  Grocery stores 
C)  Utilities 
D)  Oil and Gas extraction B

Question 3

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

Accepted Answer

fixed costs

Question 4

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 2011, the operating expenses are expressed as:

Accepted Answer

A)  30.3% 
B)  28.0% 
C)  43.8% 
D)  100% 
A)  30.3% 
B)  28.0% 
C)  43.8% 
D)  100%

Question 5

Sustainable earnings represent:

Accepted Answer

A)  the level of earnings expected to persist in the future. 
B)  the level of earnings and the growth in the levels of earnings expected to persist in the future. 
C)  the growth rate of future earnings. 
D)  retained earnings. 
A)  the level of earnings expected to persist in the future. 
B)  the level of earnings and the growth in the levels of earnings expected to persist in the future. 
C)  the growth rate of future earnings. 
D)  retained earnings.

Question 6

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

Question 7

To reduce the risk inherent in ______________________________ a company should strive for a high proportion of variable costs in its cost structure.

Accepted Answer

The answer of To reduce the risk inherent in ______________________________...

Question 8

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...

Question 9

Below is financial information for two restaurant retailers. Popper's Company operates an innovative retail bakery-cafe business and franchising business. At the end 2010, Popper's had 132 company-owned and 346 franchise-operated bakery-cafes. Popper's located most of their unique bakery-cafe concept stores in suburban, strip mall, and regional mall locations. As a first mover in this concept, the company operates in 32 states. Simmer Corporation began operations five years earlier than Popper's and purchases and roasts whole bean coffees and sells them, along with numerous coffee drinks and related products at over 2,900 Company-operated retail stores.
Selected Data for Popper's Company and Simmer Corporation
(amounts in millions)
   
Required:
a. Compute the Inventory turnover, fixed asset turnover, and accounts receivable turnover.
b. Describe the likely reasons for the difference in the accounts receivable turnover and the inventory turnover

Accepted Answer

The answer of Below is financial information for two restaurant...

Question 10

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 
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 11

When the financial analysts multiplies the profit margin for ROA with the assets turnover ratio the result is called ______________

Accepted Answer

The answer of When the financial analysts multiplies the profit...

Question 12

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

Accepted Answer

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 affect GAAP measures of revenues and expenses. 
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 affect GAAP measures of revenues and expenses.

Question 13

Asset turnover represents:

Accepted Answer

A)  The ability of the firm to generate income from operations for a particular level of sales. 
B)  The ability to generate sales from a particular investment in assets. 
C)  The ability to manage the level of investment in assets for a particular level of assets. 
D)  The number of days, on average, it takes management to turnover assets. 
A)  The ability of the firm to generate income from operations for a particular level of sales. 
B)  The ability to generate sales from a particular investment in assets. 
C)  The ability to manage the level of investment in assets for a particular level of assets. 
D)  The number of days, on average, it takes management to turnover assets.

Question 14

When calculating Basic earnings per share net income is adjusted by____________

Accepted Answer

The answer of When calculating Basic earnings per share net...

Question 15

Return on common equity can be disaggregated into profit margin for ROCE, capital structure leverage and _________________________________________________.

Accepted Answer

The answer of Return on common equity can be disaggregated...

Question 16

EPS is an ambiguous measure of profitability because it reflects operating performance in the numerator and ________________________________________ in the denominator.

Accepted Answer

The answer of EPS is an ambiguous measure of profitability...

Question 17

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.

Accepted Answer

The answer of One problem with using EPS as a...

Question 18

When calculating the return on fixed assets sales is divided by _________________

Accepted Answer

Average fi

Question 19

Another term for earnings power is:

Accepted Answer

A)  nonrecurrent revenue. 
B)  nonrecurrent gains. 
C)  sustainable earnings. 
D)  net change in equity. 
A)  nonrecurrent revenue. 
B)  nonrecurrent gains. 
C)  sustainable earnings. 
D)  net change in equity.

Question 20

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

Accepted Answer

A)  sales 
B)  assets 
C)  working capital 
D)  shareholders' equity 
A)  sales 
B)  assets 
C)  working capital 
D)  shareholders' equity

Refer to the information for Orca Industries . Orca's accounts receivable turnover is (assume that Orca makes all sales on account):

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

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

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 2011, the operating expenses are expressed as:

Sustainable earnings represent:

Refer to the information for Net Devices Inc. What is the accounts receivable turnover ratio for Net Devices for 2011?

To reduce the risk inherent in ______________________________ a company should strive for a high proportion of variable costs in its cost structure.

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

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

When the financial analysts multiplies the profit margin for ROA with the assets turnover ratio the result is called ______________

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

Asset turnover represents:

When calculating Basic earnings per share net income is adjusted by____________

Return on common equity can be disaggregated into profit margin for ROCE, capital structure leverage and _________________________________________________.

EPS is an ambiguous measure of profitability because it reflects operating performance in the numerator and ________________________________________ in the denominator.

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.

When calculating the return on fixed assets sales is divided by _________________

Another term for earnings power is:

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

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Recognition

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters

Exam 4: Profitability Analysis

Refer to the information for Orca Industries . Orca's accounts receivable turnover is (assume that Orca makes all sales on account):

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

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

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 2011, the operating expenses are expressed as:

Sustainable earnings represent:

Refer to the information for Net Devices Inc. What is the accounts receivable turnover ratio for Net Devices for 2011?

To reduce the risk inherent in ______________________________ a company should strive for a high proportion of variable costs in its cost structure.

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

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

When the financial analysts multiplies the profit margin for ROA with the assets turnover ratio the result is called ______________

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

Asset turnover represents:

When calculating Basic earnings per share net income is adjusted by____________

Return on common equity can be disaggregated into profit margin for ROCE, capital structure leverage and _________________________________________________.

EPS is an ambiguous measure of profitability because it reflects operating performance in the numerator and ________________________________________ in the denominator.

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.

When calculating the return on fixed assets sales is divided by _________________

Another term for earnings power is:

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

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Recognition

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters

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.