Exam 4: Analyzing and Interpreting Financial Statements

The company's leverage ratio has moved from 15.2% to 32%. Its return on equity ratio has also moved up, from 20.5% to 45.3%. Its times interest earned ratio has dropped to 3.5. Which of the following is the best statement to describe the company?

CapiCal Industries declared a quarterly dividend of $.56 to its 250,000 common shares from quarterly earnings of $306,250. It has no preferred shares. Universal Hotels declared a quarterly dividend of $.35 to its one million shares on quarterly earnings of $1,225,000, net of preferred shares. Both companies are trading at a P/E ratio around 14. What is the dividend payout ratio for each company?

Bowden Building Supplies Ltd. year-end financial statements show working capital at $1,107,655, total assets of $3,971,090, total liabilities at $2,078,405, retained earnings at $192,685, sales revenue at $5,460,400, EBIT at $326,746, and the market value of common shares at $2,182,020. Using the value from Altman's Z-score model, what can be concluded about the business?

Which of the following represents the most appropriate description of vertical analysis?

Coronation Computers opened the fiscal year with a balance sheet showing retained earnings at $355,000, and common shares at $1.2 million. It added another $500,000 from the sale of 200,000 preferred shares, which paid $.35 a share in dividends in the last quarter of the fiscal year. If the Company's net income for the year was a $412,100 and there were no dividends paid to common shareholders, what was its return on equity?

Zeechan Landscaping Company Limited had sales revenues of $1,400,000 last year and $1,200,000 the year before. Cost of Goods Sold was $980,000 last year and $780,000 the year before. Operating expenses were $300,000 for both last year and the year before. Comparing gross profit and operating profit margins, it could be concluded that

There are 3 million common and one million preferred Kline Inc shares outstanding. Common shares closed on the TSX November 18 at $80.64 each, after an announcement that net income for the year was $22,500,000, and that a dividend of $2.25 would be paid on common shares and a dividend of $.90 would be paid on preferred shares. What was Kline's P/E ratio on that date?

The sales revenue to capital employed ratio for Miralonge Manufacturing is 3.2. The industry benchmark is 3. One conclusion that would be consistent with the ratio, is that the company

The current ratio for Joshua Wines is 2.2 and the acid test ratio for the business is 0.7. These ratios suggest that the company

The gross profit margin will be impacted by

At the end of this year the Full Glass Company has cash of $100,000, accounts receivable of $200,000, inventory of $300,000 and total assets of $1,000,000. The corresponding figures at the end of last year were $65,000, $140,000, $225,000, and $730,000 respectively. What is the percentage change in inventory?

Mehal Mechanics Ltd's leverage ratio moved from 15.3% to 9% between 2005 and 2007. No common or preferred shares were issued in the year. Which of the following situations is most likely to achieve this result?

Halveston Aeronautics, with 130,000 common shares outstanding, declared a dividend of $148,200. Share price is $54. The dividend yield is

The ________ is the highest price that potential buyers are willing to pay for a company's share in the stock market.

An analyst is comparing financial results at two Canadian companies that only have domestic sales. The Metro Canoe Company manufactures and sells canoes. The Country Ski Company manufactures and sells snow skis. Both companies have about the same gross margins, level of sales, credit policies, and have chosen December 31 as their fiscal year end. Which of the following statements is likely to be correct?

For the previous five-year period, Galhadi Telecommunications Limited has had EBIT of $28.6 million, $28 million, $33.2 million, $34.1 million, $33.8 million, respectively, and a corresponding EBITDA of $15.5 million, $15.4 million, $15.5 million, $17.5 million, and $17 million. Which of the following statements is the best conclusion to draw about year 3?

Financial ratios are used to assess a company's statements because they

Last year the price earning ratio was 10 for the market as a whole and was 20 for Hi Tek Plastics Ltd. Hi Tek's share price ended the year at $50.00. This year the economy is expected to boom and P/E multiple expansion is underway. At the end of the year, the P/E multiple is expected to be 20 for the market. If Hi Tek's is expected to be in the same risk class as last year and its net income is supposed to triple, at what price should Hi Tek's shares finish the year?

A company's statements provided the following data: sales revenue equals $4,482,000, gross margin equals $2,689,000, EBIT equals $538,000, net income equals $204,000, current liabilities equal $700,000, long-term liabilities equal $2,800,000, common shares equal $3 million, preferred shares equal $1 million, retained earnings equal $275,000. The return on capital employed (ROCE) for the company is

Tuscarora Transportation Limited currently trades for $70 with a P/E ratio of 16.4. Python Logistics trades for $54 with a P/E ratio of 38.6. A conclusion that could be drawn from these numbers, is that the market believes