Exam 3: Financial Statements and Ratio Analysis

Due to inflationary effects, inventory costs and depreciation write-offs can differ from their true values, thereby distorting profits.

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 net working capital for Dana Dairy Products in 2013 was ________. (See Table 3.2)

________ analysis involves the comparison of different firms' financial ratios at the same point in time.

On the balance sheet, net fixed assets represent ________.

Discuss the limitations of ratio analysis and the cautions which must be taken when reviewing a cross-sectional and time-series analysis.

Creditors are primarily interested in short-term liquidity of the company and its ability to make interest and principal payments.

Which of the following ratios is difficult for the creditors of a firm to analyze from the published financial statements?

Net fixed assets represent the difference between gross fixed assets and accumulated depreciation of fixed assets.

________ indicates the percentage of each sales dollar remaining after the firm has paid for its goods.

A firm had the following accounts and financial data for 2014: The firm's net profit after taxes for 2014 is ________.

Ratios provide a ________ measure of a company's performance and condition.

________ ratio indicates that a firm will be able to meet interest obligations due on outstanding debt.

The two basic measures of liquidity are ________.

The lower the fixed-payment coverage ratio, the lower is the firm's financial leverage.

The ________ ratio may indicate poor collections procedures or a relaxed credit policy.

The primary concern of creditors when assessing the strength of a firm is its ________.

A firm with a low net profit margin can improve its return on total assets by ________.

The balance sheet is a statement which balances a firm's assets (what it owns) against its debt (what it owes) or its equity (what is provided by owners).

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. -Long-term debt for CEE in 2013 was ________. (See Table 3.1)

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 debt ratio for Dana Dairy Products in 2013 was ________. (See Table 3.2)