Exam 3: Financial Statements and Ratio Analysis

The DuPont formula allows a firm to break down its return into the net profit margin, which measures the firm's profitability on sales, and its total asset turnover, which indicates how efficiently the firm has used its assets to generate sales.

The three basic ratios used in the DuPont system of analysis are ________.

________ measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes, and preferred stock dividends, have been deducted.

The Financial Accounting Standards Board (FASB) Standard No. 52 mandates that U.S.-based companies translate their foreign-currency-denominated assets and liabilities into dollars using the current rate (translation) method.

Total assets less net fixed assets equals ________.

________ is a term used to describe the magnification of risk and return introduced through the use of fixed-cost financing, such as preferred stock and debt.

________ ratio measures a firm's ability to pay contractual interest payments.

________ measures the return earned on the common stockholders' investment in the firm.

Table 3.2 Dana Dairy Products Key Ratios Income Statement Dana Dairy Products For the Year Ended December 31, 2013 Balance Sheet Dana Dairy Products December 31, 2013 -Dana Dairy Products had a ________ degree of financial leverage than the industry standard, resulting in ________. (See Table 3.2)

The rule-setting body, which authorizes generally accepted accounting principles is the ________.

Which of the following is a current liability?

Gross profit margin measures the percentage of each sales dollar left after a firm has paid for its goods and operating expenses.

Average age of inventory can be calculated as inventory divided by 365.

A(n) ________ provides a financial summary of a firm's operating results during a specified period.

The liquidity of a business firm refers to the solvency of the firm's overall financial position.

Paid-in capital in excess of par represents a firm's book value received from the original sale of common stock.

________ analysis involves comparison of current to past performance and the evaluation of developing trends.

A U.S. parent company's foreign retained earnings are not adjusted for currency movements to reflect each year's operating profits or losses.

The analyst should be careful when analyzing ratios that ________.

A firm has a current ratio of 1; in order to improve its liquidity ratios, this firm might ________.