Exam 3: Financial Statements and Ratio Analysis

Firm ABC had operating profits of $100,000, taxes of $17,000, interest expense of $34,000 and preferred dividends of $5,000. What was the firm's net profit after taxes?

Net profit margin measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes, and common stock dividends, have been deducted.

The primary concern of creditors when assessing the strength of a firm is the firm's

________ is where the firm's ratio values are compared to those of a key competitor or group of competitors, primarily to identify areas for improvement.

Gross profit margin measures the percentage of each sales dollar left after the firm has paid for its goods and operating expenses.

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 -Using the modified DuPont formula allows the analyst to break Dana Dairy Products return on equity into 3 components: the net profit margin, the total asset turnover, and a measure of leverage (the financial leverage multiplier). Which of the following mathematical expressions represents the modified DuPont formula relative to Dana Dairy Products' 2010 performance? (See Table 3.2)

A firm had year end 2004 and 2005 retained earnings balance of $670,000 and $560,000, respectively. The firm reported net profits after taxes of $100,000 in 2005. The firm paid dividends in 2005 of

The firm's creditors are primarily interested in the short-term liquidity of the company and its ability to make interest and principal payments.

Paid-in capital in excess of par represents the firm's book value received from the original sale of common stock.

Without adjustment, inflation may tend to cause ________ firms to appear more efficient and profitable than ________ firms, all else being the same.

The ________ measures the overall effectiveness of management in generating profits with its available assets.

The ________ ratio may indicate that the firm will not be able to meet interest obligations due on outstanding debt.

The net value of fixed assets is also called its

The liquidity of a business firm is measured by its ability to satisfy its long-term obligations as they come due.

A firm had the following accounts and financial data for 2005: The firm's earnings per share, rounded to the nearest cent, for 2005 was ________.

In the DuPont system, the return on total assets (asset) is equal to

At the end of 2005, the Long Life Light Bulb Company announced it had produced a gross profit of $1 million. The company has also established that over the course of this year it has incurred $345,000 in operating expenses and $125,000 in interest expenses. The company is subject to a 30% tax rate and has declared $57,000 total preferred stock dividends. (a) How much is the earnings available for common stockholders? (b) Compute the increased retained earnings for 2005 if the company were to declare a $4.25 common stock dividend. The company has 15,000 shares of common stock outstanding.

To analyze the firm's financial performance, the following types of ratio analyses EXCEPT ________ may be used.

The federal regulatory body governing the sale and listing of securities is called the

________ analysis involves the comparison of different firms' financial ratios at the same point in time.