Exam 3: Analyzing Financial Statements

Which statement is true?

Liquidity and Asset Management Ratios Green Products, Inc. has current liabilities = $40 million, current ratio = 2.4 times, inventory turnover ratio = 8 times, average collection period = 40 days, and sales = $320 million. What is the value of their cash and marketable securities?

Which of the following is NOT one of the cautions in using ratios to evaluate firm performance?

Sustainable Growth Rate You have located the following information on Tyler Company: debt ratio = 50%, capital intensity ratio = 1.5 times, profit margin = 9%, and dividend payout ratio = 40%. What is the sustainable growth rate for Tyler?

Internal Growth Rate Saddle and Bridle reported a profit margin of 12%, total asset turnover ratio of 2 times, debt-to-equity ratio of 1.9 times, net income of $1 million, and dividends paid to common stockholders of $250,000. The firm has no preferred stock outstanding. What is Saddle and Bridle's internal growth rate?

Internal Growth Rate Last year Rain Repel Corporation had an ROA of 5% and a dividend payout ratio of 90%. What is the internal growth rate?

For publicly traded firms, these ratios measure what investors think of the company's future performance and risk.

DuPont Analysis You are considering investing in Lenny's Lube, Inc. You have been able to locate the following information on the firm: total assets = $20 million, accounts receivable = $6 million, ACP = 20 days, net income = $5 million, and debt-to-equity ratio = 2.5 times. What is the ROE for the firm?

Sustainable Growth Rate You have located the following information on Maize Company: debt ratio = 20%, capital intensity ratio = 1.25 times, profit margin = 12%, and dividend payout ratio = 10%. What is the sustainable growth rate for Maize?

A strong liquidity position means that ______________.

A firm has an ROE of 14% and a debt ratio of 40%. If the total asset turnover is 3.4, what is the firm's profit margin?

An investor wanting large returns will be interested in companies that have ____.

Internal Growth Rate Leash N Collar reported a profit margin of 8%, total asset turnover ratio of 1.5 times, debt-to-equity ratio of 0.75 times, net income of $400,000, and dividends paid to common stockholders of $200,000. The firm has no preferred stock outstanding. What is Leash N Collar's internal growth rate?

A corporation has a total asset turnover of 2 times, ROA of 12% and ROE of 14%. What is this firm's profit margin and debt ratio?

Profitability and Asset Management Ratios You are thinking of investing in Ski Sports, Inc. You have only the following information on the firm at year-end 2011: net income = $50,000, total debt = $1 million, and debt ratio = 70%. What is Ski's ROE for 2011?

Profitability and Asset Management Ratios You are thinking of investing in Wave Runnerz, Inc. You have only the following information on the firm at year-end 2011: net income = $10 million, total debt = $65 million, and debt ratio = 35%. What is Wave Runnerz's ROE for 2011?

Liquidity Ratios Burt's TVs has current liabilities of $25 million. Cash makes up 40 percent of the current assets and accounts receivable makes up another 20 percent of current assets. Burt's current ratio = .85 times. What is the value of inventory listed on the firm's balance sheet?

This ratio measures a firm's ability to pay off short-term obligations without relying on inventory sales.

Asset Management Ratios Tops N Bottoms Corp. reported sales for 2008 of $50 million. Tops N Bottoms listed $4 million of inventory on its balance sheet. Using a 365-day year, how many days did Tops N Bottoms' inventory stay on the premises? How many times per year did Tops N Bottoms' inventory turn over?

Ratio Analysis Use the following information to complete the balance sheet below. Current ratio = 3 Current liabilities = 5 million Credit sales = 25 million Average collection period = 30 Inventory turns = 8 Total asset turns = .75 Debt ratio = 45%