Exam 3: Analyzing Financial Statements

Zoe's Dog Toys, Inc. reported a debt to equity ratio of 0.5 times at the end of 2011. If the firm's total assets at year-end are $50 million, how much of their assets is financed with equity?

Last year Umbrellas Unlimited Corporation had an ROA of 10 percent and a dividend payout ratio of 50 percent. What is the internal growth rate?

You are thinking of investing in Tikki's Torches, Inc. You have only the following information on the firm at year-end 2011: net income = $500,000, total debt = $12 million, and debt ratio = 40 percent. What is Tikki's ROE for 2011?

Which of the following statements is correct?

Which ratio measures the overall return on the firm's assets inclusive of financial leverage and taxes?

You are evaluating the balance sheet for Blue Jays Corporation. From the balance sheet you find the following balances: cash and marketable securities = $200,000, accounts receivable = $800,000, inventory = $1,000,000, accrued wages and taxes = $250,000, accounts payable = $400,000, and notes payable = $300,000. What are Blue Jays' current ratio, quick ratio, and cash ratio, respectively?

The term "spreading the financial statements" refers to:

You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $100 million in assets with $90 million in debt and $10 million in equity. LotsofEquity, Inc. finances its $100 million in assets with $10 million in debt and $90 million in equity. What are the debt ratio, equity multiplier, and debt-to-equity ratio for the two firms?

Which of the following statements is correct?

Which ratio measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm's debt?

Which of the following measures the number of dollars of sales produced per dollar of fixed assets?

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?

Which of these ratios measure the extent to which the firm uses debt (or financial leverage) versus equity to finance its assets?

Last year, DJ's Soda Fountains, Inc. reported an ROE = 27 percent. The firm's debt ratio was 50 percent, sales were $9 million, and the capital intensity ratio was 1.5 times. What is the net income for DJ's last year?

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

Which of these statements is true?

Calculate the times interest earned ratio using the following information. Sales = $1.5 million, cost of goods sold = $800,000, depreciation expense = $100,000, addition to retained earnings = $85,000, dividends per share = $1.2, tax rate = 30 percent, and number of shares of common stock outstanding = 100,000. Assume the firm has no preferred stock.

Which ratio measures the number of dollars of operating cash available to meet each dollar of interest and other fixed charges that the firm owes?

Which of these statements is true?

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