Exam 5: Risk Analysis

Which of the following states of financial distress would be considered the most troubling for an investor or creditor?

Which of the following ratios is not a measure of long-term solvency risk?

An analyst can view the revenues to cash ratio as a ________________________________________.

Common shareholders benefit with increasing proportions of debt in the capital structure as long as the firm maintains an excess of ____________________ over the after-tax cost of debt

The source of risk related to technology, regulation and availability of raw materials is ____________________.

Refer to the financial statement data for Patriot Comp. for 2006 and 2005. Complete the table by computing the ratios.

Dallas Corp. has a current ratio of 6, under which of the following scenarios might this indicate a problem

The beta coefficient measures the ____________________ of a firm's returns with those of all shares traded in the market (in excess of the risk-free interest rate).

Which of the following is a measure of market equity risk?

Below is selected information from DXI's 2007 financial statements: Dec. 31, 2006 As of Dec.31, 2007 \ 745,800 \ 958,245 Cash and short-term investments 135,400 125,850 AccountsReceivable (net) 175,840 195,650 Inventories 30,860 45,300 Prepaid Expenses and other current assets \ 1,087,900 \ 1,325,045 Total Current Assets 1,358,700 1,478,320 Plant, Property and Equipment, net 120,400 125,600 Intangible Assets \ 2,567,000 \ 2,928,965 Total Assets 38,108 \ 25,190 Short-term borrowings 40,000 45,000 Current portion of long-term debt 325,900 285,400 Accounts payable 705,891 916,722 Acculed liabilities 05,891 \ 16,722 Accued liablilties 115,600 125,400 Income taxes payable \ 1,225,499 \ 1,397,712 Total Current Liabilities 430,000 450,000 Long-term Debt \ 1,655,499 \ 1,847,712 Total Liabilities \ 911,501 \ 1,081,253 Shareholders' Equity \ 2,567,000 \ 2,928,965 Total Liabilities and Shareholders Equity $\text { Selected Income Statement Data - for the year ending December 31,2007: }$ \ 3,210,645 Net Sales -2,310,210 Cost of GoodsSold 900,435 Pperating Income 324,850 Net Income $\text { SelectedStatement of Cash Flow Data - for the year encling December 31,2007:}$ \ 584,750 Cash Flows from Operations 42,400 Interest Expense 114,200 Income Tax Expense DXI's 2007 Interest Coverage ratio is

When the excess of ROA over the after-tax cost of borrowing declines, additional ________________________________________ begins to reduce the return to common shareholders.

Long-term ______________________________ represents the longer-term ability of the firm to generate cash internally or from external sources to satisfy plant capacity and debt repayment needs.

The analysis of short-term liquidity risk requires an understanding of the _________________________ of a firm.

Bankruptcy prediction research has identified three broad factors influencing long-term solvency risk, which of the following is not one of the factors?

The best indicator for assessing a firm's long-term solvency risk is its ability to generate what over a period of years?

Below is selected information from DXI's 2007 financial statements: Dec. 31, 2006 As of Dec.31, 2007 \ 745,800 \ 958,245 Cash and short-term investments 135,400 125,850 AccountsReceivable (net) 175,840 195,650 Inventories 30,860 45,300 Prepaid Expenses and other current assets \ 1,087,900 \ 1,325,045 Total Current Assets 1,358,700 1,478,320 Plant, Property and Equipment, net 120,400 125,600 Intangible Assets \ 2,567,000 \ 2,928,965 Total Assets 38,108 \ 25,190 Short-term borrowings 40,000 45,000 Current portion of long-term debt 325,900 285,400 Accounts payable 705,891 916,722 Acculed liabilities 05,891 \ 16,722 Accued liablilties 115,600 125,400 Income taxes payable \ 1,225,499 \ 1,397,712 Total Current Liabilities 430,000 450,000 Long-term Debt \ 1,655,499 \ 1,847,712 Total Liabilities \ 911,501 \ 1,081,253 Shareholders' Equity \ 2,567,000 \ 2,928,965 Total Liabilities and Shareholders Equity $\text { Selected Income Statement Data - for the year ending December 31,2007: }$ \ 3,210,645 Net Sales -2,310,210 Cost of GoodsSold 900,435 Pperating Income 324,850 Net Income $\text { SelectedStatement of Cash Flow Data - for the year encling December 31,2007:}$ \ 584,750 Cash Flows from Operations 42,400 Interest Expense 114,200 Income Tax Expense DXI's 2007 Liabilities to Shareholders' Equity ratio is

Bankruptcy analysis research has gone through many iterations, from univariate bankruptcy prediction models to sophisticated logit models. However, after examining the results of the research there appear to be a number of common factors that consistently explain bankruptcy. These factors can be grouped into investment factors, financing factors, operating factors. For each of the three groups discuss specific factors that have been found to significantly explain bankruptcy.

In bankruptcy prediction analysis a type ____________________ error is classifying a firm as nonbankrupt when it ultimately goes bankrupt.

The current risk-free rate of return in the economy is 4%. In addition, the market rate of return is currently 9.5%. Given this information what would be the expected return on common stock for a company with a systemic risk level (Beta) of 1.2? Show your calculations. In addition, describe systemic risk.

Cash flow from operations indicates the amount of cash that the firm derived from operations after funding ______________________________.