Exam 5: Risk Analysis

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

Which of the following is not one of the three explanatory variables that determines a firm's market beta?

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 ________________________________________ ratio indicates the number of times that net income before interest expense and income taxes exceeds interest expense.

Which of the following properly links the factors affecting a firm's ability to generate cash with its need to use cash in investing? $\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

Refer to the financial statement data for Patriot Corp. for 2011 and 2010. Complete the table by computing the ratios. $\text {Patriot Corp.}$ $\text {Bnlamce Slicet}$ As of December 31 , 2011 2010 Assets: Cash andCash Equivalents \ 69,000 \ 55,250 AccountsReceivable 126,500 80,750 Inventory Curent Assets 287,500 199,750 Equipment 194,063 148,750 Less: Accumulated depreciation Equipment-Net 155,250 119,000 Land 132,250 106,250 Total assets: Liabilities: Accounts Payable \ 69,000 \ 42,500 Accrued Salaries Payable 51,750 42,500 Rent Expense Payable 35,750 28,500 Income Tax Payable Current Liabilities 161,288 114,750 Long-term note payable Total Liabilities 33,788 216,750 Stocklolders' Equity: Common stock 115,000 89,250 Retained earnings Total liabilitiesand stocklolders' equity: \5 75,000 \4 25,000 $\text {Patriot Carp.}$ $\text {Ineome Strtument}$ $\text {For the year ended December 31, 2011}$ Revenues \3 73,750 Cost of goods sold Gross Profit 149,500 Depreciation expense (9,062) Salary expense (56,063) Insurance Expense (44,850) Rent Expense (18,688) Interest Expense Total Operating Expenses Income from Operations 14,717 Income Tax Expense Net income Dividends paid to Common Shareholders \3 ,090 Financial Ratio to be calculated: Current Ratio Quick Ratio Days Accounts Receivable Days Inventory Days Accounts Payable Net Days Working Capital Long-term Debt to Long-term Capital Ratio Long-term Debt to Shareholders' Equity ratio Liabilities to Total Assets Interest Coverage ratio N/A - Not Applic able for the given year 2011 2010 N/A N/A N/A N/A N/A

Large current ratios indicate the availability of cash and near cash assets to repay ____________________ coming due within the next year.

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.

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.

Morrow Company currently has a current ratio of 1.1. The company decides to borrow $1,000,000 from First National Bank for a period of six months. After the borrowing Morrow's current ratio will be

The main ratio used by many financial analysts to examine a company's short-term liquidity risk is the current ratio. However, there are a number of problems that arise when this ratio is used to examine short-term liquidity risk that may make the current ratio less useful than initially thought. Discuss the interpretative problems of using the current ratio.

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

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

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

For each of the following factors, determine if the given change or level of that factor would lead an analyst to believe that managers of a firm are more or less likely to engage in earnings manipulation: Earuings Maruipulation More likely/lesslikely 1. DaysSales in Receivable Index increases 2. Gross Margin index decreases below 1 3. AssetQuality index increases 4. Depreciation index decreases to below 1 5. Leverage Index increases

Mobile Company 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. Days of other financing required by Mobile at the end of 2010 would be

Financially healthy firms frequently close any cash flow gaps in their operating cycles with ________________________________________.

The current risk-free rate of return in the economy is 4%. In addition, the market rate of return is currently 9.5%. A. 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. B. Describe systemic risk.

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

Non-U.S. companies that list securities in the United States typically include a risk factors item in the: