Exam 10: Analysis of Financial Statements

Financial ratios can be used to estimate systematic risk.

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 interest expense rate.

The comparisons with which ratios should be made include the following,except

Cross-sectional analysis is a useful technique for estimating future performance that involves examining a firm's relative performance over time.

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 asset turnover ratio.

According to the DuPont system ROE (return on equity)can be decomposed into the profit margin ratio and the total asset turnover ratio.

Financial Accounting Standards Board (FASB)recognizes that it would be improper for all companies to use identical and restrictive accounting principles.

The market liquidity of a security can be measured using

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 interest coverage for 2004?

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 return on equity (ROE)for Zeco Company and the Industry. Zeco Industry Average

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 net profit margin?

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 fixed asset turnover ratio?

The statement of cash flows shows the effect on the firm's cash flows of earnings and changes in the assets,current liabilities,long-term liabilities and net worth.

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 quick ratio for 2004?

Which of the following factors would be indicative of a high quality balance sheet?

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 return on equity in 2004?

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 the financial leverage multiplier used in the BMC system?

The five major classes of ratios include the following,except

Which ratio is considered an internal liquidity ratio?

Some factors that determine business risk include sales variability and debt to equity ratio.