Exam 3: Financial Statements and Ratio Analysis

Average payment period can be calculated as accounts payable divided by average sales per day.

When assessing the fixed-payment coverage ratio, ________.

Accounting practices and procedures used to prepare financial statements are called ________.

________ are especially interested in the average payment period, since it provides them with a sense of the bill-paying patterns of the firm.

In the DuPont system of analysis, the return on total assets (asset) is equal to ________.

A firm with a low return on total assets can improve its return on equity, all else remaining the same, by ________.

Complete the balance sheet for General Aviation, Inc. based on the following financial data. Balance Sheet General Aviation, Inc. December 31, 2013 Key Financial Data (2005) 1. Sales totaled $720,000. 2. The gross profit margin was 38.7 percent. 3. Inventory turned 6 times. 4. There are 360 days in a year. 5. The average collection period was 31 days. 6. The current ratio was 2.35. 7. The total asset turnover was 2.81. 8. The debt ratio was 49.4 percent. 9. Total current assets equal $159,565.

Higher the debt ratio, more the financial leverage a firm has and thus, the greater will be its risk and return.

Ag Silver Mining, Inc. has $500,000 of earnings before interest and taxes at the year end. Interest expenses for the year were $10,000. The firm expects to distribute $100,000 in dividends. Calculate the earnings after taxes for the firm assuming a 40 percent tax on ordinary income.

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 -The inventory turnover for Dana Dairy Products in 2013 was ________. (See Table 3.2)

The federal regulatory body governing the sale and listing of securities is called the ________.

In the DuPont system of analysis, the return on equity is equal to ________.

The 2002 law that established the Public Company Accounting Oversight Board (PCAOB) was called ________.

A U.S. parent company's foreign equity accounts are translated into dollars using the historical rate or average rate based on the company's discretion.

The liquidity of a business firm is measured by its ability to satisfy its long-term obligations as they come due.

FASB Standard No. 52 mandates that U.S.-based companies must translate their foreign-currency-denominated assets and liabilities into dollars using the ________.

A(n) ________ is useful in evaluating credit policies.

A firm with a total asset turnover lower than industry standard may have ________.

Table 3.1 Information (2013 values) 1. Sales totaled $110,000 2. The gross profit margin was 25 percent. 3. Inventory turnover was 3.0. 4. There are 360 days in the year. 5. The average collection period was 65 days. 6. The current ratio was 2.40. 7. The total asset turnover was 1.13. 8. The debt ratio was 53.8 percent. -Inventory for CEE in 2013 was ________. (See Table 3.1)

In ratio analysis, a comparison to a standard industry ratio is made to isolate ________ deviations from the norm.