Exam 3: Financial Statements and Ratio Analysis

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. -Total assets for CEE in 2013 were ________. (See Table 3.1)

In an effort to analyze Clockwork Company finances, Jim realized that he was missing the company's net profits after taxes for the current year. Find the company's net profits after taxes using the following information. Return on total assets = 2% Total asset turnover = 0.5 Cost of goods sold = $105,000 Gross profit margin = 0.30

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 management at Dana Dairy Products ________ since 2012. (See Table 3.2)

Construct the DuPont system of analysis using the following financial data for Key Wahl Industries and determine which areas of the firm need further analysis. Key Financial Data

Typically, higher coverage ratios are preferred, but a very high ratio may indicate under-utilization of fixed-payment obligations, which may result in unnecessarily low risk and return.

Book value per share is the ratio of ________.

Time-series analysis evaluates the performance of various firms at the same point in time using financial ratios.

Earnings per share represents the dollar amount earned and distributed to shareholders.

The statement of cash flows reconciles the net income earned during a given year, and any cash dividends paid, with the change in retained earnings between the start and end of that year.

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 -Using the modified DuPont formula allows the analyst to break Dana Dairy Products return on equity into 3 components: the net profit margin, the total asset turnover, and a measure of leverage (the financial leverage multiplier). Which of the following mathematical expressions represents the modified DuPont formula relative to Dana Dairy Products' 2013 performance? (See Table 3.2)

Reliable Auto Parts has 5,000 shares of common stock outstanding. The company also has the following amounts in revenue and expense accounts. Calculate (a) gross profits. (b) operating profits. (c) net profits before taxes. (d) net profits after taxes (assume a 40 percent tax rate). (e) earnings available to common stockholders. (f) earnings per share.

The ________ is used by financial managers as a structure for dissecting a firm's financial statements to assess its financial condition.

________ may indicate a firm is experiencing stockouts and lost sales.

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 gross profit margin and net profit margin for Dana Dairy Products in 2013 were ________. (See Table 3.2)

Using the DuPont system of analysis, holding other factors constant, an increase in financial leverage will result in ________.

Which of the following is excluded when calculating quick ratio?

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

The stockholder's report includes ________.

Retained earnings on the balance sheet represents the ________.

Which of the following is true of current ratio?