Exam 3: Financial Statements and Ratio Analysis

Benchmarking is a type of time-series analysis in which the firm's ratio values are compared to those of a key competitor or group of competitors, primarily to isolate areas of opportunity for improvement.

When preparing a statement of cash flows, retained earnings adjustments are required so that which of the following are separated on the statement?

Net profits after taxes are defined as

If Nico Corporation has annual purchases of $300,000 and accounts payable of $30,000, then average purchases per day are ________ and the average payment period is ________.

Net fixed assets represent the difference between gross fixed assets and the total expense recorded for the depreciation over then entire lives of the firm's fixed assets.

All of the following are examples of current liabilities EXCEPT

Table 3.1 Information (2010 values) 1. Sales totaled $110,000 2. The gross profit margin was 25 percent. 3. Inventory turnover was 3.0. 4. There are 360 days in the year. 5. The average collection period was 65 days. 6. The current ratio was 2.40. 7. The total asset turnover was 1.13. 8. The debt ratio was 53.8 percent. -Long-term debt for CEE in 2010 was ________. (See Table 3.1)

Benchmarking is a type of cross-sectional analysis in which the firm's ratio values are compared to those of firms in other industries, primarily to identify areas for improvement.

The stockholder's report may include all of the following EXCEPT

The ________ provides a financial summary of the firm's operating results during a specified period.

Inflationary effects typically have a greater impact the larger the differences in the age of the assets of the firms being compared. Without adjustment, inflation tends to cause older firms (with older fixed assets) to appear more efficient and profitable than newer firms (with newer fixed assets).

Both present and prospective shareholders are interested in the firm's current and future level of risk and return. These two dimensions directly affect share price.

Table 3.2 Dana Dairy Products Key Ratios Income Statement Dana Dairy Products For the Year Ended December 31, 2010 Balance Sheet Dana Dairy Products December 31, 2010 -Dana Dairy Products' gross profit margin was inferior to the industry standard. This may have resulted from ________. (See Table 3.2)

The lower the fixed-payment coverage ratio, the lower is the firm's financial leverage.

The analyst should be careful when evaluating a ratio analysis that

Table 3.1 Information (2010 values) 1. Sales totaled $110,000 2. The gross profit margin was 25 percent. 3. Inventory turnover was 3.0. 4. There are 360 days in the year. 5. The average collection period was 65 days. 6. The current ratio was 2.40. 7. The total asset turnover was 1.13. 8. The debt ratio was 53.8 percent. -Accounts receivable for CEE in 2010 was ________. (See Table 3.1)

The ________ measures the percentage of profit earned on each sales dollar before interest and taxes.

The stockholder's annual report must include

Earnings per share represents amount earned during the period on each outstanding share of common stock.

The average payment period can be calculated as accounts payable divided by average purchases per day.