Exam 5: Risk Analysis

Short-term ____________________________ represents a firm's near-term ability to generate cash to service working capital needs and debt service requirements.

All of the following are common industry risks faced by companies except:

Falcon Corporation has current assets of $400,000 and current liabilities of $275,000. Required: Compute the effect of each of the following transactions on Falcon's current ratio: a. Refinanced a $60,000 long-term mortgage with a short-term note. b. Purchasing $108,000 of merchandise inventory with short-term accounts payable. c. Paying $50,000 of short-term accounts payable. d. Collecting $90,000 of short-term accounts receivable.

The current risk-free rate of return in the economy is 6.5%. In addition, the market rate of return is currently 10%. A. Given that a company's expected return on common stock is 12.5% what is the company's systemic risk level (beta)? Show your calculations. B. Describe systemic risk.

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

Caraway Company's net accounts receivable was $300,000 at December 31, 2012 and $450,000 at December 31, 2013. Net cash sales for 2008 were $425,000. The accounts receivable turnover for 2013 was 7.0, and this turnover figure was computed from net credit sales for the year. Required: What were Caraway's total net sales for 2013?

Changes in foreign exchange rates can affect a firm in all of the following ways except:

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

One common problem with the current ratio is that it is susceptible to "window dressing." If prior to the end of the accounting period Saxon Company has a current ratio of 1.5 and management wishes to boost its current ratio it may decide to

Which of the following properly links the factors affecting a firm's ability to generate cash with its need to use cash in operations? $\quad$$\quad$$\quad$$\underline{\text {Ability to generate cash}}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\underline{\text {Need to use cash}}$ A. Profitability of goods and services sold Working capital requirements B. Sales of existing plant assets Plant capacity requirements C. Borrowing capacity Debt service requirements D. Profitability of goods and services sold Debt service requirements

Below is selected information from Marker's 2012 financial statements: -Marker's 2012 Long-term Debt to Long-Term Capital ratio is

Mobile Company manufactures computer technology devices. Selected financial data for Mobile is presented below, use the information to answer the following questions: As of Dec. 31, 2010 Dec. 31, 2009 Cash and short-term investments \ 1,267,038 \ 616,604 Accounts Receivable (net) 490,816 665,828 Inventories 338,599 487,505 Prepaid Expenses and other current assets Total Current Assets \ 2,388,964 \ 2,061,852 \ 38,108 Short-term borrowings \ 25,190 210,090 Current portion of long-term debt 182,295 334,247 Accounts payable 296,307 743,999 Accrued liabilities 941,912 239.793 Income taxes payable Total Current Liabilities 1,648,753 1,566,237 $\underline{\text {Selected Income Statement Data - for the year ending December 31, 2010:}}$ Net Sales \4 ,885,340 Cost of Goods Sold 2,542,353 Operating Income 733,541 Net Income 230,101 $\underline{\text {Selected Statement of Cash Flow Data - for the year ending December 31, 2010:}}$ Cash Flows from Operations \ 1,156,084 - Refer to the information for Mobile Company. Mobile's quick ratio changed by what percentage from 2009 to 2010?

All of the following are common firm-specific risks faced by companies except:

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

For each of the following scenarios, determine if it is an indicator of potential cash flow problems: Potential future cash flow problems Yes/No a. Growth in accounts receivable or inventories that is less the growth rate in sales. b. Increase in accounts payable that exceed the increase in inventories. c. Capital expenctitures that substentially exceed cash flow from operations. d. Sales of marketable securities are less than purchases of marketable securities. e. Other operating current liabilities that grow at alesser rate than sales. f. A reduction or elinination of dividend payments g. A substantial shirf from long-term borrowing to short-term borrowing.

Below is selected data of Pronto Company: Balanice Sleet Data Accounts receivable Allowance for doubtful accounts Net accounts receivable Inventories - LCM Income Statement Data Net credit sales Net cash sales Net sales Cost of goods sold Selling, general and adm. expenses Other Total operating expenses Net income As of December 31: 2012 \ 671,000 \ 640,000 \ 542,500 \ 2,370,000 475,000 150,000 2011 \6 42,000 \6 20,000 \6 42,500 \3 ,000,000 \2 ,160,000 350,000 125,000 Required: a. What is the accounts receivable turnover for 2012? b. What is the inventory turnover for 2012?

Changes in interest rates can typically affect firms in all of the following ways except:

Below is selected information from Marker's 2012 financial statements: - Marker's 2012 Long-term Debt to Shareholders' Equity ratio is

The operating cycle must not only generate cash to supply ________________________________________ needs, it must generate sufficient cash to service debt.

Below is selected information from Marker's 2012 financial statements: - Marker's Liabilities to Assets Ratio for 2012 is