Exam 12: Analyzing and Interpreting Financial Statements

Assuming no changes in other variables, which of the following would increase ROA?

Mark Tyndall is successful entrepreneur and operates his company, Tynder Inc, as a private corporation.He initially invested $50,000 for the common shares three years ago, and last year the company was able to borrow $100,000 from the bank.The loan is still outstanding.Tynder Inc has just had its first profitable year, earning a net income of $75,000.Mark has only been paying himself a minimal salary and was looking forward to receiving more income in the form of dividends now that the company was profitable, but his accountant has suggested that the dividend payout ratio be limited to 25%. Required: A) What is a dividend payout ratio? If Mark follows the accountant's suggestion how much would the dividend be? B) Does a company need to report net earnings to pay dividends? Explain briefly. C) Why doesn't a company pay out all of its earnings as dividends? What factors are specific to Tynder Inc's case? D) Why might a company not maintain a constant dividend payout ratio? E) Explain what factors Mark should consider when determining the value of dividends to pay out.How would your answer differ if Tynder Inc was a public company?

Which of the following actions would reduce a company's cash lag?

The following data comes from Beaumont Company's financial statements for the year ended December 31, 2014.(Assume that the balance sheet amounts represent both average and ending balances.) Cash \ 5,000 Accounts receivable 75,000 Inventory 32,500 Sales 525,000 Cost of goods sold 315,000 Net income 42,500 What are Beaumont's accounts receivable turnover ratio and their inventory turnover ratio closest to? A/R Inventory Turnover Turnover A) 7 times 9.7 times B) 7 times 16.1 times C) 1.4 times 9.7 times D) 1.4 times 16.1 times

The following information comes from the January 31, 2014, financial statements of Dynamo Ltd, a clothing retailer: 2014 2013 Cash and cash equivalents \ 20,000 15,000 Accounts receivable 1,400 1,100 Inventories, ending 26,000 25,000 Accounts payable 20,100 17,600 Sales 227,000 Cost of goods sold 140,500 Net income 10,700 Required: A) Calculate their cash lag. B) Explain what the cash lag tells you about a company in general and this company in particular. C) Other than the ratios, what other information in Dynamo's financial statements would be useful when analyzing their liquidity?