Exhibit 10.7 Use the Information Below for the Following Problem(S) You are provided with the following information for the Nelson Corporation. $\begin{array}{lrr} \begin{array}{l} \\ \text{Net Income}\\ \text{Depreciation}\\ \text{Total Current Assets}\\ \text{Total Current Liabilities}\\ \end{array}\ \begin{array}{r} 2003 \\ \hline \$ 1500 \\ \$ \quad 200 \\ \$ \quad 700 \\ \$ \quad 500 \end{array}\ \begin{array}{r} \text { 2004 } \\ \hline \$2000 \\ \$ \quad 475 \\ \$ \quad 900 \\ \$ \quad 800 \end{array}\ \end{array}$ During 2004 Nelson Corp. made capital expenditures totaling $500 and disposed property worth $800. -Refer to Exhibit 10.7.The firm's free cash flow is

A) $2200 B) $1900 C) $2875 D) $2325 E) $2575 A) $2200 B) $1900 C) $2875 D) $2325 E) $2575

Exhibit 10.4 Use the Information Below for the Following Problem(S) You are provided with the following information about MaxCorp. $\begin{array}{c} \begin{array}{lll} \text{Net sales}\\ \text{Total Assets}\\ \text{Depreciation}\\ \text{Net Income}\\ \text{Long term Debt}\\ \text{Equity}\\ \text{Dividends}\\ \end{array} \begin{array}{lll} &&& \end{array} \begin{array}{lll} 5000\\ 3000\\ 260\\ 600\\ 2000\\ 2160\\ 160\\ \end{array} \end{array}$ -Refer to Exhibit 10.4.Calculate the return on equity (ROE).

A) 20.4% B) 17.8% C) 22.4% D) 27.8% E) 30.4% A) 20.4% B) 17.8% C) 22.4% D) 27.8% E) 30.4%

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) $\begin{array}{l} \text { Net Sales } &&&&&&&&&&&&& \$ 1025 \\ \text { Cost of Goods Sold } &&&&&&&&&&&&& \underline{682} \\ \text { Gross Profit Margin } &&&&&&&&&&&&& 343 \\ \text { Depreciation } &&&&&&&&&&&&& 31 \\ \text { Operating Expense } &&&&&&&&&&&&& 103 \\ \text { Administrative Expense } &&&&&&&&&&&&& \underline{127} \\ \text { Operating Profit } &&&&&&&&&&&&& 82 \\ \text { Interest } &&&&&&&&&&&&& \underline{27} \\ \text { Profit Before Tax } &&&&&&&&&&&&& 55 \\ \text { Taxes } &&&&&&&&&&&&& \underline{17} \\ \text { Net Income } &&&&&&&&&&&&& \$ 38 \end{array}$ BMC CORPORATION BAIANCE SHEET FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) $\begin{array}{lrlr} \begin{array}{c} Assets\\ Cash\\ Accts rec\\ Inventory\\ \text{Ttl cur assts}\\ \text{Net fixed assets}\\ \\ \\ \\\\ \text{Total assets}\\\\ \end{array} \begin{array}{c} \$61\\ 286\\ 354\\ \hline 701\\ 802\\ \hline\\ \\ \\\\ \$ 1503\\ \end{array} \begin{array}{c} Liabilities\\ \text{Notes payable}\\ \text{Accounts payable}\\ Accruals\\ \text{Total current liabilities}\\ \text{Long term debt}\\ \text{Common stock (\$1.50 par)}\\ \text{Paid in surplus}\\ \text{Retained earnings}\\ \text{Total liabilities and}\\ \text{Stockholders' equity}\\\\ \end{array} \begin{array}{c} \$ 223 \\ 152 \\ 32 \\ \hline 407\\ 306 \\ 102 \\ 226 \\ 462 \\ \hline\\ \$ 1503 \end{array} \end{array}$ -Refer to Exhibit 10.1.What was BMC'S current ratio at year-end 2004?

A) 0.852 B) 1.000 C) 1.368 D) 1.722 E) 1.943 A) 0.852 B) 1.000 C) 1.368 D) 1.722 E) 1.943

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. $\begin{array}{c} \begin{array}{lll} Sales\\ \text{Cost of Goods Sold}\\ \text{Gross Profit}\\ \text{Depreciation}\\ \text{Operating Expenses}\\ \text{Administration Exp.}\\ \text{Operating Profit 15,000}\\ \text{Interest Expense}\\\\ \text{Profit Before Taxes}\\ Taxes\\\\ \text{Net Income}\\ Dividends\\ \end{array} \begin{array}{lll} &&& \end{array} \begin{array}{lll} 1,000,000\\ 750,000 \\ \hline 250,000 \\ 100,000 \\ 70,000 \\ 65,000\\\\\\ 8,000\\\hline 7,000\\\\ 2,800\\\hline 4,200\\ 3,200 \end{array} \end{array}$ $\begin{array}{c} \begin{array}{lll} \text{Assets}\\ \text{Cash}\\ \text{Accounts Receivable}\\ \text{Inventory}\\ \text{Total Current Assets}\\ \text{Net Fixed Assets}\\ \text{Total Assets}\\\\\\ \end{array} \begin{array}{lll} \\ 50,000 \\ 250,000 \\ 325,000 \\ \hline 825,000 \\ 450,000 \\ \hline 1,275,000\\\\\\ \end{array} \begin{array}{lll} \text{Liabilities}\\ \text{Notes Payable}\\ \text{Accounts Payable}\\ \text{Total Current Liab.}\\ \text{Long Term Debt}\\ \text{Common Stock}\\ \text{Retained Earnings}\\ \text{Total Liab. \& Earnings}\\\\ \end{array} \begin{array}{lll} 250,000 \\ 350,000 \\ \hline 800,000 \\ 225,000 \\ 200,000 \\ 50,000 \\ \hline 1,275,000 \end{array} \end{array}$ 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 Asset Turnover.

A) 0.59 B) 0.78 C) 1.28 D) 1.70 E) 1.97 A) 0.59 B) 0.78 C) 1.28 D) 1.70 E) 1.97

Exhibit 10.3 Use the Information Below for the Following Problem(S) You are provided with the following information for a company. $\begin{array}{c} \begin{array}{lll} \text{Net Annual Sales}\\ \text{Average Receivables}\\ COGS\\ \text{Average Inventory}\\ \text{Average Trade Payables}\\ \end{array} \begin{array}{lll} &&& \end{array} \begin{array}{lll} 60000 \\ 1200 \\ 35000 \\ 3000 \\ 1500\\ \end{array} \end{array}$ -Refer to Exhibit 10.3.Calculate the receivables turnover ratio.

A) 50 B) 25 C) 55 D) 36 E) 27 A) 50 B) 25 C) 55 D) 36 E) 27

Exhibit 10.5 Use the Information Below for the Following Problem(S) You are provided with the following information about Albermarle Corp. $\begin{array}{c} \begin{array}{lll} \text{Income Statement Data}\\ \text{Sales}\\ \text{Operating Income}\\ \text{Depreciation}\\ \text{Interest Expense}\\ \text{Pretax Income}\\ \text{Income Taxes}\\ \text{Net Income after tax}\\\\ \text{Balance Sheet Data}\\ \text{Fixed Assets}\\ \text{Total Assets}\\ \text{Working Capital}\\ \text{Total Debt}\\ \text{Equity}\\ \end{array} \begin{array}{lll} && \end{array} \begin{array}{r} \\ 542\\ 38\\ 3\\ 3\\ 32\\ 13\\ 19\\\\\\ 41\\ 245\\ 123\\ 16\\ 159\\ \end{array} \end{array}$ -Refer to Exhibit 10.5.Calculate the operating margin.

A) 15.5% B) 5.6% C) 8.6% D) 10.6% E) 6.5% A) 15.5% B) 5.6% C) 8.6% D) 10.6% E) 6.5%

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) $\begin{array}{l} \text { Net Sales } &&&&&&&&&&&&& \$ 1025 \\ \text { Cost of Goods Sold } &&&&&&&&&&&&& \underline{682} \\ \text { Gross Profit Margin } &&&&&&&&&&&&& 343 \\ \text { Depreciation } &&&&&&&&&&&&& 31 \\ \text { Operating Expense } &&&&&&&&&&&&& 103 \\ \text { Administrative Expense } &&&&&&&&&&&&& \underline{127} \\ \text { Operating Profit } &&&&&&&&&&&&& 82 \\ \text { Interest } &&&&&&&&&&&&& \underline{27} \\ \text { Profit Before Tax } &&&&&&&&&&&&& 55 \\ \text { Taxes } &&&&&&&&&&&&& \underline{17} \\ \text { Net Income } &&&&&&&&&&&&& \$ 38 \end{array}$ BMC CORPORATION BAIANCE SHEET FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) $\begin{array}{lrlr} \begin{array}{c} Assets\\ Cash\\ Accts rec\\ Inventory\\ \text{Ttl cur assts}\\ \text{Net fixed assets}\\ \\ \\ \\\\ \text{Total assets}\\\\ \end{array} \begin{array}{c} \$61\\ 286\\ 354\\ \hline 701\\ 802\\ \hline\\ \\ \\\\ \$ 1503\\ \end{array} \begin{array}{c} Liabilities\\ \text{Notes payable}\\ \text{Accounts payable}\\ Accruals\\ \text{Total current liabilities}\\ \text{Long term debt}\\ \text{Common stock (\$1.50 par)}\\ \text{Paid in surplus}\\ \text{Retained earnings}\\ \text{Total liabilities and}\\ \text{Stockholders' equity}\\\\ \end{array} \begin{array}{c} \$ 223 \\ 152 \\ 32 \\ \hline 407\\ 306 \\ 102 \\ 226 \\ 462 \\ \hline\\ \$ 1503 \end{array} \end{array}$ -Refer to Exhibit 10.1.What is BMC'S operating profit margin?

A) 0.800 B) 0.054 C) 0.080 D) 0.540 E) 5.480 A) 0.800 B) 0.054 C) 0.080 D) 0.540 E) 5.480

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) $\begin{array}{c} \begin{array}{lll} Net Sales\\ Cost of Goods Sold\\ Gross Profit Margin\\ Depreciation\\ Operating Expense\\ Administrative Expense\\ Operating Profit\\ Interest\\ Profit Before Tax\\ Taxes\\ \end{array} \begin{array}{lll} &&& \end{array} \begin{array}{r} \$ 1075 \\ 706 \\ \hline 369 \\ 30 \\ 109 \\ 129 \\ \hline 101 \\ 29 \\ \hline 72 \\ 21 \\ \hline \$ 51\\ \end{array} \end{array}$ STAR CORPORATION BALANCE SHEET FISCAL YEAR ENDING 12/31/2004 (DOLIARS IN THOUSANDS) $\begin{array}{c} \begin{array}{lll} \text{Assets}\\ \text{Cash}\\ \text{Accounts receivable}\\ \text{Inventory}\\ \text{Total current assets}\\ \text{Net fixed assets}\\ \\\\\\\\ \text{Total assets}\\ \end{array} \begin{array}{r} \\ \$ \quad 69 \\ 233 \\ 348 \\ \hline 650 \\ 886 \\ \hline\\\\\\\\ \$ 1536 \end{array} \begin{array}{lll} \text{Liabilities}\\ \text{Notes payable}\\ \text{Accounts payable}\\ \text{Accruals}\\ \text{Total current liabilities}\\ \text{Long term debt}\\ \text{Common stock (\$1.50 par)}\\ \text{Paid in surplus}\\ \text{Retained earnings}\\ \text{Total liabilities and}\\ \text{Stockholders' equity}\\ \end{array} \begin{array}{r} \\ \$ \quad 231 \\ 146 \\ 31 \\ \hline 408 \\ 318 \\ 111 \\ 190 \\ 509 \\ \hline\\ \$1536 \end{array} \end{array}$ -Refer to Exhibit 10.2.What is Star's traditional cash flow?

A) 81 B) 72 C) 51 D) 102 E) 131 A) 81 B) 72 C) 51 D) 102 E) 131

Exhibit 10.3 Use the Information Below for the Following Problem(S) You are provided with the following information for a company. $\begin{array}{c} \begin{array}{lll} \text{Net Annual Sales}\\ \text{Average Receivables}\\ COGS\\ \text{Average Inventory}\\ \text{Average Trade Payables}\\ \end{array} \begin{array}{lll} &&& \end{array} \begin{array}{lll} 60000 \\ 1200 \\ 35000 \\ 3000 \\ 1500\\ \end{array} \end{array}$ -Refer to Exhibit 10.3.Calculate the inventory turnover ratio.

A) 27.23 B) 23.3 C) 55.43 D) 8.67 E) 11.67 A) 27.23 B) 23.3 C) 55.43 D) 8.67 E) 11.67

Exhibit 10.4 Use the Information Below for the Following Problem(S) You are provided with the following information about MaxCorp. $\begin{array}{c} \begin{array}{lll} \text{Net sales}\\ \text{Total Assets}\\ \text{Depreciation}\\ \text{Net Income}\\ \text{Long term Debt}\\ \text{Equity}\\ \text{Dividends}\\ \end{array} \begin{array}{lll} &&& \end{array} \begin{array}{lll} 5000\\ 3000\\ 260\\ 600\\ 2000\\ 2160\\ 160\\ \end{array} \end{array}$ -Refer to Exhibit 10.4.Calculate the sustainable growth rate.

A) 27.8% B) 30.4% C) 20.4% D) 27.8 % E) 17.8% A) 27.8% B) 30.4% C) 20.4% D) 27.8 % E) 17.8%

Exam 10: Analysis of Financial Statements

Exhibit 10.7 Use the Information Below for the Following Problem(S) You are provided with the following information for the Nelson Corporation. Net Income Depreciation Total Current Assets Total Current Liabilities \ 2003 \ 1500 \ 200 \ 700 \ 500 \ 2004 \2 000 \ 475 \ 900 \ 800 \ During 2004 Nelson Corp. made capital expenditures totaling $500 and disposed property worth $800. -Refer to Exhibit 10.7.The firm's free cash flow is

(Multiple Choice)

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Question 41

Exhibit 10.4 Use the Information Below for the Following Problem(S) You are provided with the following information about MaxCorp. Net sales Total Assets Depreciation Net Income Long term Debt Equity Dividends 5000 3000 260 600 2000 2160 160 -Refer to Exhibit 10.4.Calculate the return on equity (ROE).

(Multiple Choice)

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(76)

Question 42

Inventory turnover,net fixed asst turnover and equity turnover are measures of operating efficiency.

(True/False)

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Question 43

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 current ratio at year-end 2004?

(Multiple Choice)

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Question 44

Financial ratios are used in stock and bond valuation models.

(True/False)

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Question 45

Which of the following is not a component of return on equity (ROE)?

(Multiple Choice)

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Question 46

Which equation is valid?

(Multiple Choice)

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Question 47

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 Asset Turnover.

(Multiple Choice)

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Question 48

Financial risk is the additional uncertainty of returns to equity holders due to

(Multiple Choice)

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Question 49

The growth of business depends on the percentage of earnings reinvested and the return on equity.

(True/False)

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Question 50

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 receivables turnover ratio.

(Multiple Choice)

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Question 51

The balance sheet shows what assets the firm controls at a point in time and how it financed the assets.

(True/False)

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Question 52

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 operating margin.

(Multiple Choice)

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Question 53

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 is BMC'S operating profit margin?

(Multiple Choice)

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Question 54

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 is Star's traditional cash flow?

(Multiple Choice)

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(82)

Question 55

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 inventory turnover ratio.

(Multiple Choice)

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Question 56

Which of the following factors would be an indication of high quality earnings?

(Multiple Choice)

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Question 57

The practice of comparing the firm to a subset of industry firms comparable in size or characteristics is referred to as

(Multiple Choice)

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Question 58

Exhibit 10.4 Use the Information Below for the Following Problem(S) You are provided with the following information about MaxCorp. Net sales Total Assets Depreciation Net Income Long term Debt Equity Dividends 5000 3000 260 600 2000 2160 160 -Refer to Exhibit 10.4.Calculate the sustainable growth rate.

(Multiple Choice)

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(80)

Question 59

Cash flow from operations = Net Income + Non cash revenue and expenses - Changes in net working capital.

(True/False)

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(78)

Question 60

Inventory turnover,net fixed asst turnover and equity turnover are measures of operating efficiency.

Financial ratios are used in stock and bond valuation models.

Which of the following is not a component of return on equity (ROE)?

Which equation is valid?

Financial risk is the additional uncertainty of returns to equity holders due to

The growth of business depends on the percentage of earnings reinvested and the return on equity.

The balance sheet shows what assets the firm controls at a point in time and how it financed the assets.

Which of the following factors would be an indication of high quality earnings?

The practice of comparing the firm to a subset of industry firms comparable in size or characteristics is referred to as

Cash flow from operations = Net Income + Non cash revenue and expenses - Changes in net working capital.

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts,convertible Securities,and Other Embedded Derivatives

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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