FIN311 -- CH3
Candy Corporation had pretax profits of $1.2 million, an average tax rate of 34% and it paid preferred stock dividends of $50,000. There were 100,000 shares outstanding and no interest expense?
$7.42
ABC. corp. extends credit terms of 45 days to its customers. Its credit collection would likely be considered poor if its average collection period was ?
57 days
Cross-sectional ratio analysis involves comparing the firm's ratios to those of firm's in other industries at the same point.
F
Earnings per share represent the dollar amount earned and distributed to shareholders.
F
The average payment period can be calculated as accounts payable dividend by average sales per day.
F
The lower the fixed-payment coverage ratio, the lower is the firm's financial leverage.
F
The statement of cash flows provides insight into the firms assets and liabilities and reconciles them with changes in it's cash and marketable securities during a period of concern.
F
The use of the audited financial statements for ratio analysis may not be preferable because there may be no reason to believe that the data contained in them reflect the firm's ______ financial condition.
F
Accounting practices and procedures used to prepare financial statements are called ?
GAAP
if the only information you were given about Ryan Corporation, a large public company in business for many years, was that had a current ratio of 2.9, what could you determine from this?
Nothing, you would also need Ryan Corporation's current ratios from the last few years and the current ratio's from the last few years of Ryan's competitors.
Due to inflationary effects, inventory costs and depreciation write-offs can differ from there ____ values, thereby distorting profits.
T
Generally- accepted accounting principles are authorized by the Financial Accounting Standards Board (FASB).
T
Net fixed assets represent the difference between gross fixed assets and the total expense recorded for the over then entire depreciation over then entire lives of the firms fixed assets.
T
Present and prospective shareholders and lenders pay close attention to the firm's degree of indebtedness and ability to distribution of earnings of them. Lenders are concerned since the more indebted the fiem, the higher the probability that the firm will be unable to satisfy the claims of all it;s creditors.
T
Publicly-owned corporations are required by the Securities and Exchange Commissions (SEC) and individual state securities commissions to provide their stockholders with an annual stockholders' report.
T
The average age of inventory is viewed as the average length of time inventory is held by the firm or as the average number days' sales in inventory.
T
The firm's creditors are primarily interested in the short-term liquidity of the company and its ability to make interest and principal payments.
T
The income statement is a financial summary of the firm's operating results during a specified period while the balance sheet is a summary statement of the firm's financial position at a given point in time.
T
Typically, higher coverage ratios are preferred, but too high a ratio may indicate under-utilization of fixed0 payment obligations, which may result in unnecessarily low risk and return.
T
Earnings available to common shareholders are defined as net profits?
after taxes - preferred dividends
The stockholder's annual report must include?
an income statement. a statement of retained earnings. a statement of cash flows. a balance sheet.
One of the most influential documents issued by a publicily-held corporation is the?
annual report
The ____ is useful in evaluating credit and collection policies ?
average collection period
The _____ represents a summary statement of the firm's financial position at a given point in time?
balance sheet
_____ analysis involves the comparison of different firm's financial ratios at the same point in time?
cross-sectional
A firm with a gross profit margin which meets industry standard and a net profit margin which is below industry standard must have excessive?
general and administrative expenses
Operating profits are defined as ?
gross profits - operating expenses
The _____ indicates the percentage of each sales dollar remaining after the firm has paid for it's goods?
gross profits margin
The ______ provides a financial summary of the firm's operating results during a specified period.
income statement
_____ evidence of the existence of a problem or outstanding management performance provided by ratio analysis.
inconclusive
A firm with a total asset turnover lower than industry standard may have?
insufficient sales
______ are especially interested in the average payment period, since it provides them with a sense of bill paying patterns of the firm?
lenders and suppliers
The _______ of a business firm is measured by its ability to satisfy it short-term obligations as they come due.
liquidity
All of the following are examples of fixed assets EXCEPT ?
marketable securities
The _____ measures the percentage of each sales dollar remaining after ALL expenses, including taxes, have been deducted?
net profit margin
The ______ is a measure of liquidity which excludes ______, generally the least liquid asset?
quick ratio ; inventory
The ______ measures the return on owners; (both preferred and common stockholders) investment in the firm?
return on equity
The primary concern of creditors when assessing the strength of a firm is the firm's ?
short-term liquidity
The analyst should be careful when evaluating a ratio analysis that ?
the dates of the financial statements being compared are the same time
The ______ ratio may indicate that the firm will not be able to meet interest obligations due on outstanding debt?
times interest earned
