Exam 3: Analyzing Financial Statements

The maximum growth rate that can be achieved financing asset growth with new debt and retained earnings is called the:

Which ratio measures the number of dollars of operating earnings available to meet the firm's interest dollars and other fixed charges?

Which ratio measures the operating return on the firm's assets irrespective of financial leverage and taxes?

You are considering a stock investment in one of two firms (A and B),both of which operate in the same industry.A finances its $20 million in assets with $18 million in debt and $2 million in equity.B finances its $20 million in assets with $2 million in debt and $18 million in equity.Calculate the debt-to-equity ratio for the two firms.

Sustainable Growth Rate You have located the following information on Rock Company: debt ratio = 40 percent,capital intensity ratio = 2.25 times,profit margin = 8 percent,and dividend payout ratio = 25 percent.What is the sustainable growth rate for Rock?

A firm reported working capital of $5.5 million and fixed assets of $20 million.Its fixed asset turnover was 1.2 times.What was the firm's sales to working capital ratio?

DuPont Analysis You are considering investing in Lenny's Lube,Inc.You have been able to locate the following information on the firm: total assets = $20 million,accounts receivable = $6 million,ACP = 20 days,net income = $5 million,and debt-to-equity ratio = 2.5 times.What is the ROE for the firm?

DuPont Analysis Last year Mocha Java,Inc.had an ROA of 10 percent,a profit margin of 5 percent,and sales of $25 million.What is Mocha Java's total assets?

Liquidity Ratios You are evaluating the balance sheet for Blue Jays Corporation.From the balance sheet you find the following balances: cash and marketable securities = $200,000,accounts receivable = $800,000,inventory = $1,000,000,accrued wages and taxes = $250,000,accounts payable = $400,000,and notes payable = $300,000.What are Blue Jays' current ratio,quick ratio,and cash ratio,respectively?

DuPont Analysis If Apex,Inc.has an ROE = 10 percent,equity multiplier = 3,and profit margin of 5 percent,what is the total asset turnover ratio?

A firm reported year-end sales of $20 million.It listed $7 million of inventory on its balance sheet.Using a 365-day year,how many days did the firm's inventory stay on the premises?

Debt Management Ratios You are considering a stock investment in one of two firms (LotsofDebt,Inc.and LotsofEquity,Inc.),both of which operate in the same industry.LotsofDebt,Inc.finances its $100 million in assets with $90 million in debt and $10 million in equity.LotsofEquity,Inc.finances its $100 million in assets with $10 million in debt and $90 million in equity.What are the debt ratio,equity multiplier,and debt-to-equity ratio for the two firms?

Which of these statements is true?

Sustainable Growth Rate Last year Umbrellas Unlimited Corporation had an ROE of 16.5 percent and a dividend payout ratio of 40 percent.What is the sustainable growth rate?

Which of the following measures the number of days that the firm holds accounts payable before it has to extend cash to buy raw materials?

Sustainable Growth Rate Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent.What is the sustainable growth rate?

Market Value Ratios Lab R Doors' year-end price on its common stock is $40.The firm has total assets of $75 million,the debt ratio is 60 percent,there is no preferred stock,and there are 4 million shares of common stock outstanding.Calculate the market-to-book ratio for Lab R Doors.

Which of the following measures the number of dollars of sales produced per dollar of fixed assets?

A firm has EBIT of $300,000 and depreciation expense of $12,000.Fixed charges total $44,000.Interest expense totals $7,000.What is the firm's cash coverage ratio?

Sustainable Growth Rate You are considering investing in Annie's Eatery.You have been able to locate the following information on the firm: total assets are $50 million,accounts receivable are $6.0 million,ACP is 20 days,net income is $5.5 million,debt-to-equity is 2.5 times,and dividend payout ratio is 55 percent.All sales are on credit.Annie's is considering loosening its credit policy such that ACP will increase to 25 days.The change is expected to increase credit sales by 5 percent.Any change in accounts receivable will be offset with a change in debt.No other balance sheet changes are expected.Annie's profit margin and dividend payout ratio will remain unchanged.Use the DuPont equation to determine how this change in accounts receivable policy will affect Annie's sustainable growth rate.