Exam 3: Financial Statements Analysis and Long-Term Planning

Marcie's Mercantile wants to maintain its current dividend policy, which is a payout ratio of 40%.The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio.Given these requirements, the maximum rate at which Marcie's can grow is equal to:

Which is a more meaningful measure of profitability for a firm, return on assets or return on equity? Why?

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Windswept, Inc. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 2008 Income Statement $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ ($ in millions) Net sales Less: Cost of goods sold Less: Depreciation Earnings before interest and taxes Less: Interest paid Taxable Income Less: Taxes Net income \ 8,450 7,240 810 \ 740 -Refer to the above TableWhat is the times interest earned ratio for 2008?

Frederico's has a profit margin of 6%, a return on assets of 8%, and an equity multiplier of 1.4.What is the return on equity?

A _____ standardizes items on the income statement and balance sheet as a percentage of total sales and total assets, respectively.

A firm has a market capitalization of $2 million, market value of interest bearing debt of $1 million, book value of interest bearing debt of $500,000 and cash of $100,000.What is the enterprise value?

The financial ratio measured as the price per share of stock divided by earnings per share is known as the:

Lee Sun's has sales of $3,000, total assets of $2,500, and a profit margin of 5%.The firm has a total debt ratio of 40%.What is the return on equity?

Last year, Alfred's Automotive had a price-earnings ratio of 15.This year, the price earnings ratio is 18.Based on this information, it can be stated with certainty that:

An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio?

When examining the EBITDA ratio, lower numbers are:

Suppose a firm calculates its external funding needs and finds that it is negative.What are the firm's options in this case?

One key reason a long-term financial plan is developed is because:

A firm has a return on equity of 15%.The debt-equity ratio is 50%.The total asset turnover is 1.25 and the profit margin is 8%.The total equity is $3,200.What is the amount of the net income?

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Windswept, Inc. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 2008 Income Statement $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ ($ in millions) Net sales Less: Cost of goods sold Less: Depreciation Earnings before interest and taxes Less: Interest paid Taxable Income Less: Taxes Net income \ 8,450 7,240 810 \ 740 -Refer to the above TableWhat is the quick ratio for 2008?

The only difference between Joe's and Moe's is that Joe's has old, fully depreciated equipment.Moe's just purchased all new equipment which will be depreciated over eight years.Assuming all else equal:

A firm has 5,000 shares of stock outstanding, sales of $6,000, an enterprise value of $5 million and an EBITDA of 1 million.What is the enterprise value multiple?

From a cash flow position, which one of the following ratios best measures a firm's ability to pay the interest on its debts?

A firm has sales of $1,200, net income of $200, net fixed assets of $500, and current assets of $300.The firm has $100 in inventory.What is the common-size statement value of inventory?

Growth can be reconciled with the goal of maximizing firm value: