Exam 3: Analyzing Financial Statements

The term "capital structure" refers to:

Internal Growth Rate Last year,Marly Brown,Inc.,reported an ROE of 30 percent.The firm's debt-to-equity was 2.50 times,sales were $20 million,the capital intensity was 1.5 times,and dividends paid to common stockholders were $500,000.The firm has no preferred stock outstanding.This year,Marly Brown plans to decrease its debt-to-equity ratio to 2.00 times.The change will not affect sales,total assets,or dividends paid,however,it will reduce the firm's profit margin to 10 percent.Use the DuPont equation to determine how the change in Marly Brown's debt ratio will affect its internal growth rate.

A firm ended the year with an average collection period of 50 days.The firm's credit sales were $11 million.What is the firm's year-end balance in accounts receivable?

DuPont Analysis Last year,PJ's Ice Cream Parlors,Inc.reported an ROE = 12 percent.The firm's debt ratio was 40 percent,sales were $25 million,and the capital intensity ratio was 0.75 times.What is the net income for PJ's last year?

The term "spreading the financial statements" refers to:

DuPont Analysis Last year,K9 WebbWear,Inc.,reported an ROE of 30 percent.The firm's debt ratio was 45 percent,sales were $20 million,and the capital intensity was 1.50 times.Calculate the net income and profit margin for K9 WebbWear last year.This year,K9 WebbWear plans to increase its debt ratio to 60 percent.The change will not affect sales or total assets,however,it will reduce the firm's profit margin to 10 percent.By how much will the change in K9 WebbWear's debt ratio affect its ROE?

Asset Management Ratios Tops N Bottoms Corp.reported sales for 2013 of $50 million.Tops N Bottoms listed $4 million of inventory on its balance sheet.Using a 365-day year,how many days did Tops N Bottoms' inventory stay on the premises? How many times per year did Tops N Bottoms' inventory turnover?

A firm has a debt ratio of 45 percent,capital intensity ratio is 1.3 times,profit margin is 10 percent,and dividend payout ratio is 30 percent.Calculate the sustainable growth rate for the firm.

Profitability Ratios PJ's Ice Cream Parlor has asked you to help piece together financial information on the firm for the most current year.Managers give you the following information: sales = $50 million,total debt = $20 million,debt ratio = 50 percent,and ROE = 12 percent.Using this information,what is PJ's ROA?

Asset Management and Profitability Ratios You have the following information on Universe It Ts,Inc.: sales to working capital = 10 times,profit margin = 25 percent,net income available to common stockholders = $3 million,and current liabilities = $1 million.What is the firm's balance of current assets?

Ratio Analysis Use the following information to complete the following balance sheet. Current ratio = 1.5 Current liabilities = $80 million Profit margin = 12 percent Credit sales = 200 million Return on equity = 15 percent Debt ratio = 60 percent

Which ratio measures the number of dollars of operating cash available to meet each dollar of interest and other fixed charges that the firm owes?

Liquidity Ratios Ernie's Mufflers has current liabilities of $45 million.Cash makes up 5 percent of the current assets and accounts receivable makes up another 50 percent of current assets.Ernie's current ratio = 1.5 times.What is the value of inventory listed on the firm's balance sheet?

An investor wanting large returns will be interested in companies that have:

Which of the following activities will increase a firm's current ratio?

A firm has an ROE of 14 percent and a debt ratio of 40 percent.If the total asset turnover is 3.4,what is the firm's profit margin?

Market Value Ratios Bree's Tennis Supply's market-to-book ratio is currently 9.4 times and PE ratio is 20 times.If Bree's Tennis Supply's common stock is currently selling at $20.50 per share,what is the book value per share and earnings per share?

Internal Growth Rate Saddle and Bridle reported a profit margin of 12 percent,total asset turnover ratio of 2 times,debt-to-equity ratio of 1.9 times,net income of $1 million,and dividends paid to common stockholders of $250,000.The firm has no preferred stock outstanding.What is Saddle and Bridle's internal growth rate?

Market Value Ratios Fancy Paws' year-end price on its common stock is $20.The firm has total assets of $40 million,the debt ratio is 40 percent,there is no preferred stock,and there are 2 million shares of common stock outstanding.Calculate the market-to-book ratio for Fancy Paws.

DuPont Analysis You are considering investing in Dakota's Security Services.You have been able to locate the following information on the firm: total assets are $50 million,accounts receivable are $1 million,ACP is 15 days,net income is $1.5 million,and debt-to-equity is 2.1 times.All sales are on credit.Dakota's is considering loosening its credit policy such that ACP will increase to 20 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.Dakota's profit margin will remain unchanged.How will this change in accounts receivable policy affect Dakota's net income,total asset turnover,equity multiplier,ROA,and ROE?