Exam 3: Financial Statements and Ratio Analysis

The ________ measures the percentage of each sales dollar remaining after all costs and expenses,including interest,taxes,and preferred stock dividends,have been deducted.

Clearly firms want to be able to pay their bills when they come due,so having liquidity is important.Can a firm have too much liquidity? Explain.

Without adjustment,inflation may tend to cause ________ firms to appear more efficient and profitable than ________ firms.

The use of the unaudited financial statements for ratio analysis is preferable because it reflects the firm's true financial condition.

Net profit after taxes is ________.

The liquidity of a business firm refers to its ability to pay its short-term obligations as they come due.

An unusually high ________ may indicate a firm is experiencing stockouts and lost sales.

Two frequently cited ratios of profitability that can be read directly from the common-size income statement are ________.

The Sarbanes-Oxley Act of 2002 was passed to eliminate many of the disclosure and conflict-of-interest problems of corporations.

Ag Silver Mining,Inc.has $500,000 of earnings before interest and taxes at the year end.Interest expenses for the year were $10,000.The firm expects to distribute $100,000 in dividends.Calculate the earnings after taxes for the firm assuming a 21 percent tax on ordinary income.

The financial leverage multiplier is the ratio of a firm's total assets to common stock equity.

The three basic ratios used in the DuPont system of analysis are ________.

A firm has a year-end retained earnings balance of $220,000 for 2018.The firm reported net profits after taxes of $50,000 and paid dividends of $30,000 in 2019.The firm's retained earnings balance at 2019 year end is ________.

In 2018,Walmart reported sales of $500.3 billion,gross profits of $126.9 billion,EBIT of $20.4 billion,and net income of $9.9 billion.The company's cost of goods sold that year equalled ________.

Paid-in capital in excess of par represents the proceeds in excess of par value received from the original sale of common stock.

Retained earnings on the balance sheet represents the ________.

In a recent year Walmart reported total asset turnover of 2.44 whereas Target reported total asset turnover of 1.84.One interpretation of this is that Walmart managed its assets more efficiently than did Target.Can you think of another reason that might explain the difference in turnover ratios that does not imply that Target managers are performing poorly relative to their peers at Walmart?

Time-series analysis is the evaluation of a firm's financial performance in comparison to other firm(s)at the same point in time.

The statement of cash flows reconciles the net income earned during a given year,and any cash dividends paid,with the change in retained earnings between the start and end of that year.

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