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Exam 9: Analyzing Financial Statements

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Question 151

Multiple Choice

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A total asset turnover ratio of 3.5 indicates that

A) For every $1 in sales,the firm acquired $3.50 in assets during the year
B) For every $1 in assets,the firm produced $3.50 in net sales during the year
C) For every $1 in assets,the firm earned gross profit of $3.50 during the year
D) For every $1 in assets,the firm earned $3.50 in earnings per share
E) For every $1 in assets,the firm paid $3.50 in dividends per share

F) B) and E)
G) D) and E)

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Question 152

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Return on total assets can be separated into profit margin and total asset turnover.

A) True
B) False

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Question 153

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The days' sales uncollected ratio is used to

The current ratio

A company's sales in Year 1 were $460,000.Sales in Year 2 were $483,200.Using Year 1 as the base year,what is the trend percentage for Year 2?

When evaluating the profit margin of a sole proprietorship,the formula should be modified by subtracting owner's equity from profit.This will factor in the value of the owner's efforts in running the business.

GAP's earnings per share is $3.11.Its common dividend is $.36 per share and its market price is $40 per share.The dividend yield is 0.9%.

Targot's current assets were $16,825.Its quick assets were $11,220.Its current liabilities were $13,190.The quick ratio is

Information from the current income statement of Coffey Corp follows: $\begin{array}{|l|r|}\hline \text { Sales } & \$ 640,000 \\\hline \text { Gross profit on sales } & 276,000 \\\hline \text { Operating income } & 64,000 \\\hline \text { Income before taxes } & 44,000 \\\hline \text { Profit } & 33,600 \\\hline\end{array}$ If the company's January 1,accounts receivable were $78,000 and its December 31,accounts receivable were $90,000,what was the company's accounts receivable turnover?

Three of the most common tools of financial analysis include horizontal analysis,vertical analysis,and ratio analysis.

On January 1,BPA Corporation had 250,000 common shares outstanding,issued for $500,000,and retained earnings of $100,000.On January 1,BPA declared a 35% share dividend to holders of record on January 15,to be distributed on January 25.Fair market value of BPA common shares on January 1 was $20 per share.What is the book value per common share on January 26?

a.What is meant by the term leverage,and how is leverage used to increase return to shareholders? b.If leverage does increase the returns to shareholders why don't all firms structure themselves to have a significantly high percentage of financing from debt and significantly less from shareholders?

Sonie's accounts receivable turnover was 5.7 for this year and 5.4 for last year.Aple's accounts receivable turnover was 6.8 for this year and 7 for last year.This means that

Alternative City had profit of $150,000 and average total assets of $312,700.Calculate its return on total assets.

The profit margin ratio is gross profit divided by net sales.

The days' sales uncollected ratio measures a company's ability to manage its debt.

The dollar change for a financial statement is calculated by

Three of the most common tools of financial analysis are

A trend percent is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

Profit margin reflects the portion of profit in each dollar of revenue.