Exam 4: Measuring Corporate Performance

A firm's net profit margin when ignoring the effects of financing is 20% with an EBIT of $1.5 million and sales of $5 million.How much did the firm pay in taxes?

Other things equal, an increase in average accounts receivable will increase a firm's return on assets.

What is the market price of a share of stock for a firm with 100,000 shares outstanding, a book value of equity of $3,000,000, and a market/book ratio of 3.5?

What are some potential pitfalls of ratio analysis based on accounting data?

A firm has sales of $5 million, average total assets of $1.6 million, average fixed assets of $1 million, and average current liabilities of $300,000.Given this information, answer the following about the firm's efficiency: Calculate asset turnover, fixed asset turnover, and NWC turnover ratios. Can the fixed asset turnover be considered appropriate and yet the total asset turnover be considered low by industry standards? How? What in general might improve NWC turnover?

When a firm's debt-equity ratio is 1.0, the firm:

How would you interpret an interval measure of 50 days?

Last year's asset turnover ratio was 2.0.Sales have increased by 25% and average total assets have increased by 10% since that time.What is the current asset turnover ratio?

Zulu Corporation had total assets of $475 million.It had sales of $300; cost of goods sold of $225 million, and operating expenses of $35 million.Tax rate is 40%.Calculate the company's Return of Assets.

__________ are those expected to be turned into cash in the near future, while __________ are those expected to be fulfilled in the near future, and the difference between the two is __________.

How does the DuPont Formula help identify the determinants of the firm's return on its assets and equity?

Name five types of distortions caused by increasing prices that have an impact on the income statement.

ABC Corp.has an ROE of 20 percent and a current dividend-payout ratio of 40 percent.Which of the following changes will allow their earnings to grow at a 15 percent rate?

Net Corp.has an ROE of 30% and would like to see earnings grow at a 18% annual rate.What percent of earnings can they afford to pay out as dividends?

What is the inventory turnover ratio for ABC Corp.if cost of goods sold equals $5,000, current ratio equals 3.0, quick ratio equals 1.5, and the firm has 1,800 in current assets?

Value Corp.recently reported earnings of $2 per share and each of their 50,000 shares is currently selling for $20.The firm's book equity is $600,000.An analyst has estimated that the firm's assets could be replaced for $1.8 million and that the Tobin's q for the firm is 1.4.[Note: Tobin's q is the ratio of market value of assets to replacement cost of the assets.] Given this information, answer the following about the firm's market-value ratios: Calculate the firm's price-to-earnings (P/E) and market-to-book ratios. If the P/E ratio is said to compare favourably to that of the industry average, speculate on what could account for this fact. Calculate the firm's market value of assets and comment on the magnitude of their Tobin's q.

What may make simple comparisons of financial ratios misleading?

An asset turnover ratio of 1.75 can be interpreted as:

TSI Inc.has enough liquid assets to finance its operations for 67 days and cash, marketable securities, and receivables totaling $1,000.TSI's average daily expenditures from operations are:

After calculating a firm's financial ratios, in what manner might they be analyzed to assess the firm's performance?