Exam 4: Financial Analysis-Sizing up Firm Performance

Kannan Carpets,Inc.has asked you to calculate the company's current ratio for 2001.All you have is a partial balance sheet and some assumptions.Using the information provided,calculate Kannan's current ratio for 2001. Gross profit margin = 50% Inventory turnover (COGS/Inv)= 5 2001 sales = $3,000

Financial ratios can highlight a firm's financial performance with regard to liquidity,solvency,and profitability.

Assume that a particular firm has a total asset turnover ratio lower than the industry norm.In addition,this firm's current ratio and acid test ratio also meet industry standards.Based on this information,we can conclude that this firm must have excessive:

Holding all other variables constant,which of the following could cause a firm's current ratio to decrease from 3.0 to 2.5? An increase in:

Which of the following is NOT a reason why financial analysts use ratio analysis?

GAAP,Inc.has total assets of $2,575,000,sales of $5,950,000,total liabilities of $1,855,062,and a net profit margin of 2.9%.What is GAAP's return on equity? Round to the nearest 0.1%.

On a common size income statement,EBIT is equal to 100%.

-Based on the information in Table 1,the debt ratio is:

Baker & Co.has applied for a loan from the Trust Us Bank in order to invest in several potential opportunities.In order to evaluate the firm as a potential debtor,the bank would like to compare Baker & Co.to the industry.The following are the financial statements given to Trust Us Bank: Compute the following ratios:

Sharky's Loan Co.has an annual interest expense of $30,000.If Sharky's times-interest-earned ratio is 2.9,what is Sharky's Earnings Before Taxes (EBT)?

The current ratio and the acid test ratio are both measures of financial leverage.

Other things held constant,an increase in ________ will decrease the current ratio.Assume an initial current ratio greater than 1.0.

If you were given the components of current assets and of current liabilities,what ratio(s)could you compute?

Lorna Dome,Inc.has an annual interest expense of $30,000.Lorna Dome's times-interest-earned ratio is 4.2.What is Lorna Dome's operating income?

A firm's average collection period has decreased significantly from the previous year.Which of the following could possibly explain the results?

Use the following information to answer the following question(s). ABC,Inc.Income Statement (in thousands) -In 1995,the improvement in ABC's return on equity occurred because:

-Based on the information in Table 1,the current ratio is:

Financial ratios comprise the principal tool of financial analysis since they can be used to answer a variety of questions regarding a firm's financial condition.

The lower the average collection period ratio,the more efficient is the firm in managing its investment in accounts receivable.

What is the purpose of using common size balance sheets and common size income statements?