Exam 14: Quantitative Company Analysis

Australian studies find that companies with a qualified audit report experience:

Item/year Profit and lossitems (in millions) (in millions) Net annual sales 2.325 3.351 Operating revenue 2.506 3.808 Operating profit before interest and tax 0.655 1.352 Interest expense 0.620 0.615 Total revenue 3.521 3.015 Cost of goods sold 1.300 1.205 Balance sheet items Receivables 0.805 0.900 Inventory 0.515 0.611 Total Non-current assets 5.400 5.355 -You are able to obtain the items in the table from a company's balance sheet and profit and loss for 2009 and 2010.Given this information,calculate the fixed assets turnover for the firm for 2010.

One problem with the internal growth rate measure is that it relies upon the assumption that all growth is financed by:

Evidence shows that mandated disclosure:

A firm has an ROE of 20% and a market-to-book ratio of 2.38.Its P/E ratio is _________.

The Lonergan study in 1996 found that fund managers believe that goodwill accounting has a major impact upon the share price.

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Flathead Lake Manufacturing }$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Income Statement } 2012$ Sales Cost of Goods Sold Depreciation Expense Gross Profit Selling and Administrative Expenses EBIT Interest Expense Income before Tax Taxes Net Income \ 9,300,000 5,750,000 \ 3,000,000 \ 800,000 \ 600,000 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Flathead Lake Manufacturing }$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Comparative Balance Sheets }$ Cash Accounts Receivable Inventory Total Current Assets Fixed Assets Total Assets Accounts Payable Bank Loans Total Current Liabilities Long-term Bonds Total Liabilities Common Stock (200,000 shares) Retained Earnings Total Equity Total Liabilities and Equity 2012 2011 \ 50,000 \ 40,000 570,000 600,000 530,000 460,000 \ 1,150,000 \ 1,100,000 2,050,000 1,400,000 \ 3,200,000 \ 2,500,000 \ 320,000 \ 300,000 480,000 400,000 \ 800,000 \7 00,000 1,500,000 1,000,000 \ 2,300,000 \ 1,700,000 200,000 200,000 700,000 600,000 900,000 \ 800,000 \ 3,200,000 \ 2,500,000 Note: The common shares are trading in the stock market for $15 per share -Refer to the financial statements of Flathead Lake Manufacturing Company.The firm's total asset turnover for 2012 is _________.(Please keep in mind that when a ratio involves both income statement and balance sheet numbers,the balance sheet numbers for the beginning and end of the year must be averaged. )

The Australian study by Cotter in 1995 finds that the correlation between earnings and returns is lower over a five-year period than over a 10-year period.

The accounting standards allow firms to use discretion in their choice of accounting methods.

Operating ROA is calculated as __________,while ROE is calculated as _________.

B.S item/year Cash 9000 3000 Receivables 22000 10000 Inventory 20000 12000 Current assets Non-current assets Current liabilities Non-current liabilities -Given the above data,calculate the current ratio for the firm for 2009.

Which of the following contains a summary of the resources under the firm's control at the end of the reporting period?

The study of Livnat and Zarowin (1990)finds that disaggregating cash flows into operating,financing and investing adds to the information content of accrual accounting.

Generally accepted accounting practices (GAAP),provide for:

Shevlin and Whittred (1994)found that,on average,returns are positive leading up to the release of an audit report.

Item/year Profit and lossitems (in millions) (in millions) Net annual sales 2.325 3.351 Operating revenue 2.506 3.808 Operating profit before interest and tax 0.655 1.352 Interest expense 0.620 0.615 Total revenue 3.521 3.015 Cost of goods sold 1.300 1.205 Balance sheet items Receivables 0.805 0.900 Inventory 0.515 0.611 Total Non-current assets 5.400 5.355 -You are able to obtain the items in the table from a company's balance sheet and profit and loss for 2009 and 2010.Given this information,calculate the average collection period for the firm for 2010.

Common-size balance sheets are prepared by dividing all quantities by total assets.

Item Value as at 2010, in millions Sales revenue 8.902 Operating revenue 9.360 Trading profit before interest and tax 5.360 Operating profit before interest and taxes 3.118 Interest expense 1.361 Operating profit after tax 0.360 -The above information is available for the firm ILA Ltd,which is listed on the Australian Stock Exchange.As a prospective investor in ILA,you are concerned about the level of debt the company has on issue.How far can the earnings of ILA fall before it will be unable to meets its debt obligations?

The receivables turnover ratio is calculated as:

In a study by Easton and Harris in 1991,what proportion of share return variation is explained by earnings figures?