Exam 5: Risk Analysis

The Johnson Company has a current ratio of 1.45. The company has just sold $600,000 worth of merchandise on credit. What will the current ratio be after the sales on credit?

_________________________ concerns a firm's ability to make interest and principal payments on borrowings as they become due.

When management takes deliberate steps at a balance sheet date to produce a better current ratio than is normal it is called ______________________________.

All of the following are common international risks faced by companies except :

For each of the following scenarios, determine if it is an indicator of potential cash flow problems:

The current risk-free rate of return in the economy is 6%. In addition, the market rate of return is currently 8.5%. A. Given this information, what would be the expected return on common stock for a company with a systemic risk level (Beta) of 1.3? Show your calculations. B. Describe systemic risk.

Common shareholders benefit with increasing proportions of debt in the capital structure as long as the firm maintains an excess of ____________________ over the after-tax cost of debt

Which of the following properly links the factors affecting a firm's ability to generate cash with its need to use cash in investing?  

Large current ratios indicate the availability of cash and near cash assets to repay ____________________ coming due within the next year.

Mobile Company Mobile Company manufactures computer technology devices. Selected financial data for Mobile is presented below; use the information to answer the following questions: Refer to the information for Mobile Company . Mobile's current ratio in 2010 was:

Bankruptcy prediction research has identified three broad factors influencing long-term solvency risk, which of the following is not one of the factors?

Marker's 2012 Liabilities to Shareholders' Equity ratio is:

In general, the shorter the number of days of needed financing, the ____________________ is the cash flow from operations to average current liabilities.

Doran Corp. has a current ratio of 6. Under which of the following scenarios might this indicate a problem?

The best indicator for assessing a firm's long-term solvency risk is its ability to generate what over a period of years?

The source of risk related to political unrest and exchange rate changes are _________________________.

Marker's 2012 Interest Coverage ratio is:

When calculating the quick ratio, an analyst would include in the numerator cash, ________________________________________, and receivables.

The main ratio used by many financial analysts to examine a company's short-term liquidity risk is the current ratio. However, there are a number of problems that arise when this ratio is used to examine short-term liquidity risk that may make the current ratio less useful than initially thought. Discuss the interpretative problems of using the current ratio.

One criticism of the interest and fixed charges coverage ratios as measures of long-term solvency risk is that they use earnings rather than cash flows in the numerator. Detail how the interest coverage ratio and fixed charges coverage ratio are calculated. In addition, discuss why using earnings in the numerator is a problem and what method could be used to alleviate this problem.