Exam 2: Analysis of Financial Statements

A firm has a profit margin of 15 percent on sales of $20,000,000. If the firm has a debt of $7,500,000, total assets of $22,500,000, and an after-tax interest cost on a total debt of 5 percent, what is the firm's return on total assets (ROA)?

Which of the following ratios is calculated to determine the liquidity of a firm?

A low inventory turnover ratio suggests that:

The Charleston Company is a relatively small, privately owned firm. Last year the company had an after-tax income of $15,000 and 10,000 shares were outstanding. The owners were trying to determine the market value for the stock prior to taking the company public. A similar firm, which is publicly traded, had a price/earnings ratio of 5.0. Using only the information given, the market value of one share of Charleston's stock is estimated as:

Which of the following financial statements is included in the annual reports of a company?

The firm's statement of retained earnings reports changes in:

Which of the following financial statements summarizes the revenue generated and the expenses incurred by a firm during the accounting period?

If a firm earns a net profit of $100,000 on sales of $2,000,000, its net profit margin is:

The balance sheet of Crimpson Solutions Ltd. has cash of $125 million, accounts receivable of $245 million, inventory of $160 million, and equipment worth $450 million. The company also has accounts payable of $120 million, notes payable of $280 million, and corporate bonds of $365 million. Crimpson's current ratio is:

In 2010, the Securities and Exchange Commission (SEC) announced its support for Generally Accepted Accounting Principles (GAAP).

A limitation of ratio analysis is that:

Emerald Corporation's current ratio is 0.5, while Ruby (Emerald's competitor) Company's current ratio is 1.5. Both firms want to "window dress" their coming end-of-year financial statements. As part of their window dressing strategy, each firm will double its current liabilities by adding short-term debt and placing the funds obtained in the cash account. Which of the statements below best describes the actual results of these transactions?

The debt ratio is calculated as:

Which of the following ratios shows the relationship between a firm's cash and other current assets, and its current liabilities?

A firm has total interest charges of $10,000 per year, sales of $1 million, a tax rate of 40 percent, and a net profit margin of 6 percent. The firm's times interest earned ratio is:

Using the information below for WAM Inc., the market value per share is: Earnings after interest and taxes = $200,000 Earnings per share = $2.00 Stockholders' equity = $2,000,000 Market/Book ratio = 0.20

Amber Devices Ltd. has total assets worth $850 million and total liabilities worth $475 million at the end of December 31, 2016. What is the amount of money received by the stockholders, if Amber liquidates all of its assets and pays off all of its outstanding debt?

Which of the following ratios measures how effectively a firm is managing its assets?

The balance sheet is a financial statement measuring the flow of funds into and out of various accounts over time while the income statement measures the progress of the firm at a point in time.

Noncash assets are expected to produce cash over time but the amount of cash they eventually produce could be higher or lower than the values at which the assets are carried on the books.