Exam 10: Analysis of Financial Statements

Some factors that determine financial risk include interest coverage and cash flow coverage.

Exhibit 10.2 Use the Information Below for the Following Problem(S) STAR CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) NetSales CostofGoodsSold GrossProfitMargin Depreciation OperatingExpense AdministrativeExpense OperatingProfit Interest ProfitBeforeTax Taxes \ 1075 706 369 30 109 129 101 29 72 21 \ 51 STAR CORPORATION BALANCE SHEET FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) Assets Cash Accounts receivable Inventory Total current assets Net fixed assets Total assets \ 69 233 348 650 886 \ 1536 Liabilities Notes payable Accounts payable Accruals Total current liabilities Long term debt Common stock ( \1 .50 par) Paid in surplus Retained earnings Total liabilities and Stockholders' equity \ 231 146 31 408 318 111 190 509 \1 536 -Refer to Exhibit 10.2.What was Star's current ratio at year-end 2004?

Exhibit 10.2 Use the Information Below for the Following Problem(S) STAR CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) NetSales CostofGoodsSold GrossProfitMargin Depreciation OperatingExpense AdministrativeExpense OperatingProfit Interest ProfitBeforeTax Taxes \ 1075 706 369 30 109 129 101 29 72 21 \ 51 STAR CORPORATION BALANCE SHEET FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) Assets Cash Accounts receivable Inventory Total current assets Net fixed assets Total assets \ 69 233 348 650 886 \ 1536 Liabilities Notes payable Accounts payable Accruals Total current liabilities Long term debt Common stock ( \1 .50 par) Paid in surplus Retained earnings Total liabilities and Stockholders' equity \ 231 146 31 408 318 111 190 509 \1 536 -Refer to Exhibit 10.2.What was Star's net profit margin?

Exhibit 10.8 Use the Information Below for the Following Problem(S) Zeco Company has the following financial statements for year ending 12/31/2008. Sales Cost of Goods Sold Gross Profit Depreciation Operating Expenses Administration Exp. Operating Profit 15,000 Interest Expense Profit Before Taxes Taxes Net Income Dividends 1,000,000 750,000 250,000 100,000 70,000 65,000 8,000 7,000 2,800 4,200 3,200 Assets Cash Accounts Receivable Inventory Total Current Assets Net Fixed Assets Total Assets 50,000 250,000 325,000 825,000 450,000 1,275,000 Liabilities Notes Payable Accounts Payable Total Current Liab. Long Term Debt Common Stock Retained Earnings Total Liab. \& Earnings 250,000 350,000 800,000 225,000 200,000 50,000 1,275,000 The Zeco Company's industry averages are as follows: Net Profit Margin = 4.5%; Total Asset Turnover = 0.8; Total Assets/Equity = 1.5 -Refer to Exhibit 10.8.Calculate the sustainable growth rate for Zeco Company.

Financial ratios can be used to identify firms that might default on a loan or declare bankruptcy.

Exhibit 10.6 Use the Information Below for the Following Problem(S) You are provided with the following information for the Klandy Corporation. \ 2003 2004 Net Income \ 1200 \ 1500 Depreciation \ 200 \ 300 Total Current Assets \ 700 \ 900 During 2004 Klandy Corp. made capital expenditures totaling $500 and disposed property worth $400. -Refer to Exhibit 10.6.The firm's free cash flow is

Exhibit 10.9 Use the Information Below for the Following Problem(S) You are provided with the following year end information for All Systems Corporation. Income Statement Data Sales Operating Income Depreciation Interest Expense Pretax Income Income Taxes Net Income after tax Balance Sheet Data Fixed Assets Total Assets Working Capital Total Debt Equity 800 280 85 48 147 52 95 810 1050 85 640 410 -Refer to Exhibit 10.9.Calculate the profit margin for the firm.

Limitations on the use of ratios include

Exhibit 10.1 Use the Information Below for the Following Problem(S) BMC CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2004 (DOLLARS IN THOUSANDS) Net Sales \ 1025 Cost of Goods Sold Gross Profit Margin 343 Depreciation 31 Operating Expense 103 Administrative Expense Operating Profit 82 Interest Profit Before Tax 55 Taxes Net Income \ 38 BMC CORPORATION BAIANCE SHEET FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) Assets Cash Acctsrec Inventory Ttl cur assts Net fixed assets Total assets \6 1 286 354 701 802 \ 1503 Liabilities Notes payable Accounts payable Accruals Total current liabilities Long term debt Common stock ( \1 .50 par) Paid in surplus Retained earnings Total liabilities and Stockholders' equity \ 223 152 32 407 306 102 226 462 \ 1503 -Refer to Exhibit 10.1.What was BMC'S interest coverage for 2004?

Exhibit 10.5 Use the Information Below for the Following Problem(S) You are provided with the following information about Albermarle Corp. Income Statement Data Sales Operating Income Depreciation Interest Expense Pretax Income Income Taxes Net Income after tax Balance Sheet Data Fixed Assets Total Assets Working Capital Total Debt Equity 542 38 3 3 32 13 19 41 245 123 16 159 -Refer to Exhibit 10.5.Calculate the financial leverage.

Which of the following is not a flow ratio?

Exhibit 10.8 Use the Information Below for the Following Problem(S) Zeco Company has the following financial statements for year ending 12/31/2008. Sales Cost of Goods Sold Gross Profit Depreciation Operating Expenses Administration Exp. Operating Profit 15,000 Interest Expense Profit Before Taxes Taxes Net Income Dividends 1,000,000 750,000 250,000 100,000 70,000 65,000 8,000 7,000 2,800 4,200 3,200 Assets Cash Accounts Receivable Inventory Total Current Assets Net Fixed Assets Total Assets 50,000 250,000 325,000 825,000 450,000 1,275,000 Liabilities Notes Payable Accounts Payable Total Current Liab. Long Term Debt Common Stock Retained Earnings Total Liab. \& Earnings 250,000 350,000 800,000 225,000 200,000 50,000 1,275,000 The Zeco Company's industry averages are as follows: Net Profit Margin = 4.5%; Total Asset Turnover = 0.8; Total Assets/Equity = 1.5 -Refer to Exhibit 10.8.Calculate Zeco Company's Net Profit Margin.

Exhibit 10.3 Use the Information Below for the Following Problem(S) You are provided with the following information for a company. Net Annual Sales Average Receivables COGS Average Inventory Average Trade Payables 60000 1200 35000 3000 1500 -Refer to Exhibit 10.3.Calculate the cash conversion cycle.

Exhibit 10.2 Use the Information Below for the Following Problem(S) STAR CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) NetSales CostofGoodsSold GrossProfitMargin Depreciation OperatingExpense AdministrativeExpense OperatingProfit Interest ProfitBeforeTax Taxes \ 1075 706 369 30 109 129 101 29 72 21 \ 51 STAR CORPORATION BALANCE SHEET FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) Assets Cash Accounts receivable Inventory Total current assets Net fixed assets Total assets \ 69 233 348 650 886 \ 1536 Liabilities Notes payable Accounts payable Accruals Total current liabilities Long term debt Common stock ( \1 .50 par) Paid in surplus Retained earnings Total liabilities and Stockholders' equity \ 231 146 31 408 318 111 190 509 \1 536 -Refer to Exhibit 10.2.What was Star's return on equity in 2004?

Exhibit 10.6 Use the Information Below for the Following Problem(S) You are provided with the following information for the Klandy Corporation. \ 2003 2004 Net Income \ 1200 \ 1500 Depreciation \ 200 \ 300 Total Current Assets \ 700 \ 900 During 2004 Klandy Corp. made capital expenditures totaling $500 and disposed property worth $400. -Refer to Exhibit 10.6.The firm's cash flow from operating activities for the year 2004 is

Determinants of market liquidity include all except the

Exhibit 10.2 Use the Information Below for the Following Problem(S) STAR CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) NetSales CostofGoodsSold GrossProfitMargin Depreciation OperatingExpense AdministrativeExpense OperatingProfit Interest ProfitBeforeTax Taxes \ 1075 706 369 30 109 129 101 29 72 21 \ 51 STAR CORPORATION BALANCE SHEET FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) Assets Cash Accounts receivable Inventory Total current assets Net fixed assets Total assets \ 69 233 348 650 886 \ 1536 Liabilities Notes payable Accounts payable Accruals Total current liabilities Long term debt Common stock ( \1 .50 par) Paid in surplus Retained earnings Total liabilities and Stockholders' equity \ 231 146 31 408 318 111 190 509 \1 536 -Refer to Exhibit 10.2.What was the financial leverage multiplier used in the Star system?

Exhibit 10.8 Use the Information Below for the Following Problem(S) Zeco Company has the following financial statements for year ending 12/31/2008. Sales Cost of Goods Sold Gross Profit Depreciation Operating Expenses Administration Exp. Operating Profit 15,000 Interest Expense Profit Before Taxes Taxes Net Income Dividends 1,000,000 750,000 250,000 100,000 70,000 65,000 8,000 7,000 2,800 4,200 3,200 Assets Cash Accounts Receivable Inventory Total Current Assets Net Fixed Assets Total Assets 50,000 250,000 325,000 825,000 450,000 1,275,000 Liabilities Notes Payable Accounts Payable Total Current Liab. Long Term Debt Common Stock Retained Earnings Total Liab. \& Earnings 250,000 350,000 800,000 225,000 200,000 50,000 1,275,000 The Zeco Company's industry averages are as follows: Net Profit Margin = 4.5%; Total Asset Turnover = 0.8; Total Assets/Equity = 1.5 -Refer to Exhibit 10.8.Calculate Zeco Company's Total Assets/Equity ratio.

Business risk is a function of

A common-size income statement expresses all income statement items