Exam 3: Analyzing Financial Statements

You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $100 million in assets with $90 million in debt and $10 million in equity. LotsofEquity, Inc. finances its $100 million in assets with $10 million in debt and $90 million in equity. What are the debt ratio, equity multiplier, and debt-to-equity ratio for the two firms?

A firm has a profit margin of 12 percent; total asset turnover of 0.55 and an equity multiplier of 2.2. What is the firm's ROA and ROE?

The maximum growth rate that can be achieved by financing asset growth with new debt and retained earnings is called the

You are considering investing in Lenny's Lube, Inc. You have been able to locate the following information on the firm: total assets = $20 million, accounts receivable = $6 million, ACP = 20 days, net income = $5 million, and debt-to-equity ratio = 2.5 times. What is the ROE for the firm?

Burt's TVs has current liabilities of $25 million. Cash makes up 40 percent of the current assets and accounts receivable makes up another 20 percent of current assets. Burt's current ratio = 0.85 times. What is the value of inventory listed on the firm's balance sheet?

Which ratio measures the percentage of total assets financed by debt?

A strong liquidity position means that

A firm has EBIT of $1,000,000 and depreciation expense of $400,000. Fixed charges total $600,000. Interest expense totals $70,000. What is the firm's cash coverage ratio?

If Apex, Inc. has an ROE = 10 percent, equity multiplier = 3, and profit margin of 5 percent, what is the total asset turnover ratio?

A firm has EBIT of $400,000 and depreciation expense of $20,000. Fixed charges total $50,000. Interest expense totals $7,000. What is the firm's cash coverage ratio?

Which of these ratios show the combined effects of liquidity, asset management, and debt management on the overall operation results of the firm?

A firm has EBIT of $1,000,000 and depreciation expense of $400,000. Fixed charges total $600,000. Interest expense totals $70,000. What is the firm's fixed-charge coverage ratio?

Calculate the times interest earned ratio using the following information. Sales = $1.5 million, cost of goods sold = $800,000, depreciation expense = $100,000, addition to retained earnings = $85,000, dividends per share = $1.2, tax rate = 30 percent, and number of shares of common stock outstanding = 100,000. Assume the firm has no preferred stock.

Which ratio measures the number of dollars of sales produced per dollar of inventory?

You have the following information on Olivia's Bridle Shop: total liabilities and equity = $65 million, current liabilities = $10 million, inventory = $15 million, and quick ratio = 3 times. Using this information, what is the balance for fixed assets on Olivia's balance sheet?

Which ratio measures the number of dollars of operating cash available to meet each dollar of interest and other fixed charges that the firm owes?

Which ratio measures the overall return on the firm's assets including financial leverage and taxes?

Will's Wheels, Inc. reported a debt-to-equity ratio of 0.65 times at the end of 2018. If the firm's total debt at year-end was $5 million, how much equity does Will's Wheels have?

Lab R Doors' year-end price on its common stock is $40. The firm has a profit margin of 10 percent, total assets of $30 million, a total asset turnover ratio of 2, no preferred stock, and there are 4 million shares of common stock outstanding. What is the PE ratio for Lab R Doors?

Return on Equity….