Exam 4: Financial Analysis-Sizing up Firm Performance

Which of the following industries has the highest average inventory turnover ratio?

Kannan Carpets,Inc.has asked you to calculate the company's current ratio for 2001.All you have is a partial balance sheet and some assumptions.Using the information provided,calculate Kannan's current ratio for 2001. Gross profit margin = 50% Inventory turnover (COGS/Inv)= 5 2001 sales = $3,000 Assets Liabilities & Equity Cash ? Accounts payable $50 AR $40 Accruals ? Inventory ? Long-term debt $400 Net fixed assets $500 Equity 250 Total assets $900 Total liab.& equity ?

Use the following information to answer the following question(s). Key Ratios for ABC,Inc.and Its Industry ABC,Inc.2013 Ratios Industry Average Ratios in 2013 Current ratio 1.2 1.4 Acid test ratio 0.89 0.94 Average collection period 30 days 25 days Inventory turnover 18.1 20.3 Fixed assets turnover 4.1 4.8 Total asset turnover 2.78 2.8 Debt ratio 50% 60% Times-interest-earned 5.5% 4.5% Net profit margin 1.15% 1.5% Return on equity 5.21% 7.32% ABC,Inc.Income Statement (in thousands) December 31,2014 Sales (all credit)$200,000 Cost of goods sold 140,000 Gross profit on sales 60,000 Operating expenses 56,000 Operating income 4,000 Interest expense 1,000 Earnings before tax 3,000 Income tax 1,050 Net income available to common stockholders $1,950 ABC,Inc.Balance Sheet (in thousands) December 31,2014 Assets Cash $2,000 Accounts receivable 17,800 Inventories 8,700 Total current assets 28,500 Gross fixed assets 70,000 Accumulated depreciation 26,500 Net fixed assets 43,500 Total assets $72,000 Liabilities and Equity Accounts payable $18,000 Accruals 13,350 Total current liabilities 31,350 Long-term debt 8,250 Total liabilities 39,600 Common stock (par value and paid in capital)2,000 Retained earnings 30,400 Total stockholders' equity 32,400 Total liabilities and equity $72,000 -In 1995,ABC's average collection period is

A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio?

Storm King Associates has a total asset turnover ratio of 1.90 and a return on total assets of 7.20%.What is Storm King's net profit margin?

Firms that engage in multiple lines of business make it difficult to assign them to an industry category for ratio analysis.

The quick ratio is a better measure of liquidity than the current ratio if the firm has current assets composed primarily of

Common size financial statements represent all figures on the financial statements

Use the following information to answer the following question(s). Key Ratios for ABC,Inc.and Its Industry ABC,Inc.2013 Ratios Industry Average Ratios in 2013 Current ratio 1.2 1.4 Acid test ratio 0.89 0.94 Average collection period 30 days 25 days Inventory turnover 18.1 20.3 Fixed assets turnover 4.1 4.8 Total asset turnover 2.78 2.8 Debt ratio 50% 60% Times-interest-earned 5.5% 4.5% Net profit margin 1.15% 1.5% Return on equity 5.21% 7.32% ABC,Inc.Income Statement (in thousands) December 31,2014 Sales (all credit)$200,000 Cost of goods sold 140,000 Gross profit on sales 60,000 Operating expenses 56,000 Operating income 4,000 Interest expense 1,000 Earnings before tax 3,000 Income tax 1,050 Net income available to common stockholders $1,950 ABC,Inc.Balance Sheet (in thousands) December 31,2014 Assets Cash $2,000 Accounts receivable 17,800 Inventories 8,700 Total current assets 28,500 Gross fixed assets 70,000 Accumulated depreciation 26,500 Net fixed assets 43,500 Total assets $72,000 Liabilities and Equity Accounts payable $18,000 Accruals 13,350 Total current liabilities 31,350 Long-term debt 8,250 Total liabilities 39,600 Common stock (par value and paid in capital)2,000 Retained earnings 30,400 Total stockholders' equity 32,400 Total liabilities and equity $72,000 -Since 2013,ABC's liquidity has

A small start-up company should choose an industry leader in the same industry as a benchmark.

Why is the quick ratio a more refined measure of liquidity than the current ratio?

S.M. ,Inc.had total sales of $400,000 in 2014 (70 percent of its sales are credit).The company's gross profit margin is 10%,its ending inventory is $80,000,and its accounts receivable is $25,000.What amount of funds can be generated by the company if it increases its inventory turnover ratio to 10.0 and reduces its average collection period to 20 days?

Which of the following is included in the denominator of the times-interest-earned ratio?

Assume that a particular firm has a total asset turnover ratio lower than the industry norm.In addition,this firm's current ratio and fixed asset turnover ratio also meet industry standards.Based on this information,we can conclude that this firm must have excessive

Which of the following ratios indicates how rapidly the firm's credit accounts are being collected?

If you were given the components of current assets and of current liabilities,what ratio(s)could you compute?

From the information presented in Table 3,calculate the following financial ratios for the Dooley Sportswear Company. current ratio operating profit margin acid test ratio net profit margin average collection period total tangible asset turnover inventory turnover times interest earned gross profit margin

In 1996,Snout and Smith,Inc.had a gross profit of $27,000 on sales of $110,000.S & S's operating expenses for 1996 were $13,000,and its net profit margin was .0585.Snout and Smith had no interest expense in 1996.Using this information,what was S & S's operating profit margin for 1996?

Which of the following is NOT a component of return on assets (ROA)?

Companies chosen for benchmmarks should be of similar size and in the same or a similar industry.