Exam 4: Profitability Analysis

Net Devices Inc. The following balance sheets and income statements are for Net Devices Inc. ,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%. BALANCE SHEETS -Refer to the information for Net Devices Inc.What is Net Devices' return on common shareholders' equity for 2011?

Freedom Company reported net income for 2010 of $2,031 million on sales of $25,600 million.Interest expense for 2010 was $235 million,and minority interest was $344 million for 2010.The income tax rate is 40 percent.Total assets were $10,800 million at the beginning of 2010 and $14,874 million at the end of 2010.Compute the rate of ROA for 2010 and disaggregate ROA into profit margin for ROA and asset turnover components.

Critics of EPS as a measure of profitability point out that it does not consider:

Multiples of EPS to value firms are referred to as:

The ____________________ effect of interest expense on net income equals one minus the marginal tax rate times the interest expense.

Carl Industries Carl Industries has condensed balance sheets as shown: -Refer to the information for Carl Industries.In a common size balance sheet for 2010,plant and equipment (net)is expressed as:

Which of the following are better indicated by percentage change statements than common-size statements?

Below are three relationships that are important to the determination of profitability.Assume assets were $22,900,000 on Dec.31,2008. REQUIRED: Compute the operating leverage,financial structure leverage,and ROCE (rounded to two places).Then use these relationships to analyze how the profitability of X-Mart changed over the three year period below.What does the company need to do to reverse this trend? What are the risks of your strategy?

Ramos Company Ramos Company included the following information in its annual report: -Refer to the information for Ramos Company.In a common size income statement for 2011,the operating expenses are expressed as:

Krane,Inc.reported net income (amounts in thousands)of $619,700 for Year 4.Included in net income was income tax expense of $10,400.During the year the company paid the preferred shareholders $9,000 in dividends.The weighted average of common shares outstanding during Year 4 was 468,810 shares.Krane Inc. ,subtracted interest expense net of tax saving on convertible debt of $4,820.If the convertible debt had been converted into common stock,it would have increased the weighted average common shares outstanding by 20,905 shares.Krane,Inc.has outstanding stock options that,if exercised,would increase the weighted average of common shares outstanding by 7,335 shares. REQUIRED: Compute basic and diluted earnings per share for Year 4,showing supporting computations.

When the financial analysts multiplies the profit margin for ROA with the assets turnover ratio the result is called ______________

The computation of the additional shares to be issued on the exercise of stock options assumes that the firm would repurchase common shares on the open market using an Amount equal to the sum of all the following except:

Discuss how the following three elements of risk help us understand return on assets differs across firms and changes over time: -Product life cycle

Firms with ____________________ levels of operating leverage experience greater variability in their return on assets.

To calculate diluted EPS,the accountant does all of the following except:

Net Devices Inc. The following balance sheets and income statements are for Net Devices Inc. ,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%. BALANCE SHEETS -Refer to the information for Net Devices Inc.What is Net Devices' capital structure leverage ratio for 2011?

Ramos Company Ramos Company included the following information in its annual report: -Refer to the information for Ramos Company.In a percentage change income statement over the period of 2009 to 2011,what is the change in sales?

Net Devices Inc. The following balance sheets and income statements are for Net Devices Inc. ,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%. BALANCE SHEETS -Refer to the information for Net Devices Inc.What is the rate of return on assets for Net Devices for 2011?

Carl Industries Carl Industries has condensed balance sheets as shown: -Refer to the information for Carl Industries.In a percentage change balance sheet over the period of 2009 to 2011,what is the change in current assets?

Firms that have either convertible securities or stock options or warrants outstanding have __________________________________________________.