Exam 4: Using Financial Statements to Analyze Value Creation

Match the correct value driver category from the list below labeled a through c with each ratio that appears in items -Common equity leverage

Match the correct value driver category from the list below labeled a through c with each ratio that appears in items -Interest coverage ratio

Match the correct value driver category from the list below labeled a through c with each ratio that appears in items -Quick ratio

Match the correct ratio name from the list below labeled a through g with each formula appearing in items -Income tax expense / income before tax

‪Use the information that follows taken from Camron Company's financial statements for the years ending December 31, 2010 and 2009 to answer problems -Calculate Camron's inventory turnover ratio and accounts receivable turnover ratio for the year ended 2010.Further, assume that in Camron's industry, the industry average inventory turnover ratio is 12 and the industry average receivables turnover ratio is 14.

Match the correct ratio name from the list below labeled a through f with the ratio formulas appearing in items -Long-term debt / total assets

Match the correct ratio name from the list below labeled a through f with the ratio formulas appearing in items -Net income / (net income + interest expense x [1 - tax rate])

Match the correct ratio name from the list below labeled a through g with each formula appearing in items -(Net income + interest expense) / average total assets

‪Use the information that follows taken from Camron Company's financial statements for the years ending December 31, 2010 and 2009 to answer problems -Calculate Camron's return on equity and return on assets for the year ended December 31, 2010.Assume that the income tax rate is 30%.Also assume that in Camron's industry, the industry average return on equity is 19% and the average return on assets is 11%.

Match the correct value driver category from the list below labeled a through c with each ratio that appears in items -Receivables turnover

‪Use the information that follows taken from Camron Company's financial statements for the years ending December 31, 2010 and 2009 to answer problems -Calculate Camron's debt to equity ratio as of December 31, 2009 and as of December 31, 2010.Also assume that in Camron's industry, the industry average debt to equity ratio is 2.75 as of December 31, 2009 and as of December 31, 2010.

Jefferson Company has current assets, current liabilities, and long-term liabilities of $9,000, $3,000, and $7,000, respectively.Within these amounts, $1,000 is accounts payable, and $1,500 is accounts receivable.What effect will the payment of the accounts payable have on the current ratio? Should Jefferson pay the accounts payable on the last day of the year? Explain.

Match the correct ratio name from the list below labeled a through g with each formula appearing in items -Current assets / current liabilities

Match the correct value driver category from the list below labeled a through c with each ratio that appears in items -Long-term debt ratio

‪Use the information that follows taken from Camron Company's financial statements for the years ending December 31, 2010 and 2009 to answer problems -Calculate Camron's current and quick ratios as of December 31, 2009 and December 31, 2010 and choose the correct answers below:

Match the correct value driver category from the list below labeled a through c with each ratio that appears in items -Debt/equity ratio

Match the correct value driver category from the list below labeled a through c with each ratio that appears in items -Average tax rate

Bonner Company has the following financial data on January 1, 2010 and January 1, 2009. In terms of the quick and current ratio, which of the following statements is true?

Match the correct value driver category from the list below labeled a through c with each ratio that appears in items -Accounts payable turnover

Fowler Company has current assets, current liabilities, and long-term liabilities of $19,000, $13,000, and $17,000, respectively.Within these amounts, $3,000 is accounts payable, and $3,500 is accounts receivable.If $3,000 of cash were used to pay off the accounts payable, what effect would this have on the current ratio?