Exam 19: Analysis of Financial Statements

The comparisons with which ratios should be made include the following, except

Exhibit 19-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Zeco Company has the following financial statements for year ending 12/31/2009. Sales 1,000,000 Cost of Goods Sold Gross Profit 250,000 Depreciation 100,000 Operating Expenses 70,000 Administration Exp. Operating Profit 15,000 Interest Expense Profit Before Taxes Taxes 7,000 Net Income 4,200 Dividends 3,200 Assets Cash 50,000 Accounts Receivable 250,000 Inventory Total Current Assets 825,000 Net Fixed Assets Total Assets 1,275,000 Liablities Notes Payable 250,000 Accounts Payable Total Current Liab. 800,000 Long Term Debt 225,000 Common Stock 200,000 Retained Earnings Total Liab. \& Earnings 1,275,000 The Zeco Company's industry averages are as follows: Net Profit Margin = 4.5%; Total Asset Turnover = 0.8; Total Assets/ Equity = 1.5 -Refer to Exhibit 19-8. Calculate Zeco Company's Total Asset Turnover.

Bond rating agencies include the analysis of financial ratios in arriving at corporate bond ratings.

Which of the following ratios is not a measurement of the firm's liquidity?

Exhibit 19-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) STAR CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2009 (DOLLARS IN THOUSANDS') Net Sales \ 1075 Cost of Goods Sold Gross Profit Margin 369 Depreciation 30 Operating Expense 109 Administrative Expense Operating Profit 101 Interest Profit Before Taxes Taxes Net Income frac 21 51 STAR CORPORATION BALANCE SHEET FISCAL YEAR ENDING 12/31/2009 (DOLLARS IN THOUSANDS) ASSETS Cash \ 69 Accounts receivables 233 Inventory Total current assets 650 Net fixed assets Total assets \ 1536 LIABILITIES Notes payable \ 231 Accounts payable 146 Accruals Total current liabilities 408 Long term debt 318 Common stock ( \ 1.50 par) 111 Paid in surplus 190 Retained earnings Total liabilities and Stockholders' equity \ 1536 -Refer to Exhibit 19-2. What was Star's quick ratio for 2009?

Financial risk is the additional uncertainty of returns to equity holders due to

Exhibit 19-3 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) You are provided with the following information for a company. Net Annual Sales 60000 Average Receivables 1200 COGS 35000 Average Inventory 3000 Average Trade Payables 1500 -Refer to Exhibit 19-3. Calculate the cash conversion cycle.

The five major classes of ratios include the following, except

Which equation is valid?

The statement of cash flows shows the effect on the firm's cash flows of earnings and changes in the assets, current liabilities, long-term liabilities and net worth.

Exhibit 19-8 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) Zeco Company has the following financial statements for year ending 12/31/2009. Sales 1,000,000 Cost of Goods Sold Gross Profit 250,000 Depreciation 100,000 Operating Expenses 70,000 Administration Exp. Operating Profit 15,000 Interest Expense Profit Before Taxes Taxes 7,000 Net Income 4,200 Dividends 3,200 Assets Cash 50,000 Accounts Receivable 250,000 Inventory Total Current Assets 825,000 Net Fixed Assets Total Assets 1,275,000 Liablities Notes Payable 250,000 Accounts Payable Total Current Liab. 800,000 Long Term Debt 225,000 Common Stock 200,000 Retained Earnings Total Liab. \& Earnings 1,275,000 The Zeco Company's industry averages are as follows: Net Profit Margin = 4.5%; Total Asset Turnover = 0.8; Total Assets/ Equity = 1.5 -Refer to Exhibit 19-8. Calculate Zeco Company's Total Assets/Equity ratio.

Exhibit 19-1 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) BMC CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2009 (DOLLARS IN THOUSANDS') Net Sales \ 1025 Cost of Goods Sold Gross Profit Margin 343 Depreciation 31 Operating Expense 103 Administrative Expense Operating Profit 82 Interest Profit Before Taxes Taxes Net Income frac 17 38 BMC CORPORATION BALANCE SHEET FISCAL YEAR ENDING 12/31/2009 (DOLLARS IN THOUSANDS) ASSETS Cash \ 61 Accounts receivables 286 Inventory Total current assets 701 Net fixed assets Total assets \ 1503 LIABILITIES Notes payable \ 223 Accounts payable 152 Accruals Total current liabilities 407 Long term debt 306 Common stock ( \ 1.50 par) 102 Paid in surplus 226 Retained earnings Total liabilities and Stockholders' equity \ 1503 -Refer to Exhibit 19-1. What was BMC's quick ratio for 2009?

Exhibit 19-1 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) BMC CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2009 (DOLLARS IN THOUSANDS') Net Sales \ 1025 Cost of Goods Sold Gross Profit Margin 343 Depreciation 31 Operating Expense 103 Administrative Expense Operating Profit 82 Interest Profit Before Taxes Taxes Net Income frac 17 38 BMC CORPORATION BALANCE SHEET FISCAL YEAR ENDING 12/31/2009 (DOLLARS IN THOUSANDS) ASSETS Cash \ 61 Accounts receivables 286 Inventory Total current assets 701 Net fixed assets Total assets \ 1503 LIABILITIES Notes payable \ 223 Accounts payable 152 Accruals Total current liabilities 407 Long term debt 306 Common stock ( \ 1.50 par) 102 Paid in surplus 226 Retained earnings Total liabilities and Stockholders' equity \ 1503 -Refer to Exhibit 19-1. What was BMC'S current ratio at year-end 2009?

The income statement indicates the flow of sales, expenses, and earnings during a period of time.

Which of the following statements regarding financial risk and business risk is true?

Exhibit 19-3 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) You are provided with the following information for a company. Net Annual Sales 60000 Average Receivables 1200 COGS 35000 Average Inventory 3000 Average Trade Payables 1500 -Refer to Exhibit 19-3. Calculate the inventory turnover ratio.

Exhibit 19-3 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) You are provided with the following information for a company. Net Annual Sales 60000 Average Receivables 1200 COGS 35000 Average Inventory 3000 Average Trade Payables 1500 -Refer to Exhibit 19-3. Calculate the receivables turnover ratio.

Exhibit 19-6 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) You are provided with the following information for the Klandy Corporation. 2008 2009 Net Income \ 1200 \ 1500 Depreciation \ 200 \ 300 Total Current Assets \ 700 \ 900 Total Current Liabilities \ 500 \ 800 During 2009 Klandy Corp. made capital expenditures totaling $500 and disposed property worth $400. -Refer to Exhibit 19-6. What is the firm's free cash flow?

Exhibit 19-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) STAR CORPORATION INCOME STATEMENT FISCAL YEAR ENDING 12/31/2009 (DOLLARS IN THOUSANDS') Net Sales \ 1075 Cost of Goods Sold Gross Profit Margin 369 Depreciation 30 Operating Expense 109 Administrative Expense Operating Profit 101 Interest Profit Before Taxes Taxes Net Income frac 21 51 STAR CORPORATION BALANCE SHEET FISCAL YEAR ENDING 12/31/2009 (DOLLARS IN THOUSANDS) ASSETS Cash \ 69 Accounts receivables 233 Inventory Total current assets 650 Net fixed assets Total assets \ 1536 LIABILITIES Notes payable \ 231 Accounts payable 146 Accruals Total current liabilities 408 Long term debt 318 Common stock ( \ 1.50 par) 111 Paid in surplus 190 Retained earnings Total liabilities and Stockholders' equity \ 1536 -Refer to Exhibit 19-2. What is Star's traditional cash flow?

DuPont Analysis breaks down return on equity into major areas that can be used to identify a firm's strengths or weaknesses with respect to