Acct 5312 McGraw Ch11
Firm E had 30,000 shares of $100 par value and 8 percent cumulative preferred stock authorized, issued, and outstanding during Year 1 and Year 2 but did not pay any preferred or common stock dividends in either year. Net income was $1,000,000 in Year 1 and $1,200,000 in Year 2. What is Firm E's preferred dividend coverage ratio for Year 2 (rounded to one decimal)? $1,200,000 / (30,000 x $100 x 8% x 2) = 2.5 times (($1,000,000 + $1,200,000) / 2) / (30,000 x $100 x 8%) = 4.6 times $1,200,000 / (30,000 x $100 x 8%) = 5.0 times $1,200,000 / (30,000 x $100) = 0.4 times
$1,200,000 / (30,000 x $100 x 8%) = 5.0 times
Sales for Year 1 and Year 2 amounted to $1,200,000 and $1,500,000, respectively. Plant and equipment was $700,000 at the end of Year 1 and $500,000 at the end of Year 2. The plant and equipment turnover for Year 2 (rounded to one decimal) was: $1,500,000 / (($700,000 + $500,000) / 2) = 2.5 times (($1,200,000 + $1,500,000) / 2) / (($700,000 + $500,000) / 2) = 2.3 times $1,500,000 / $500,000) = 3.0 times (($1,200,000 + $1,500,000) / 2) / $500,000 = 2.7 times
$1,500,000 / (($700,000 + $500,000) / 2) = 2.5 times
For Year 2, sales were $1,200,000 and cost of goods sold was $800,000. Inventories amounted to $90,000 at the end of Year 1 and $110,000 at the end of Year 2. The days' sales in inventory for Year 2 (rounded to one decimal) was: $110,000 / ($1,200,000 / 365) = 33.5 days (($90,000 + $110,000) / 2) / ($800,000 / 365) = 45.6 days $90,000 / ($800,000 / 365) = 41.0 days $110,000 / ($800,000 / 365) = 50.2 days
$110,000 / ($800,000 / 365) = 50.2 days
Sales for Year 1 and Year 2 amounted to $500,000 and $600,000, respectively. Accounts receivable was $100,000 at the end of Year 1 and $120,000 at the end of Year 2. The days' sales in accounts receivable for Year 2 (rounded to one decimal) was: (($100,000 + $120,000) / 2) / ($600,000 / 365) = 66.9 days $120,000 / ((($500,000 + $600,000) / 2) / 365) = 79.6 days $100,000 / ($600,000 / 365) = 60.8 days $120,000 / ($600,000 / 365) = 73.0 days
$120,000 / ($600,000 / 365) = 73.0 days
Firm A's common stock has a par value per share of $1, market value per share of $90, earnings per share of $5, dividends per share of $2, and a book value per share of $60. What is Firm A's dividend payout ratio (rounded to one decimal)? $2 / $90 = 2.2% $2 / $1 = 2.0 times $5 / $2 = 2.5 times $2 / $5 = 40%
$2 / $5 = 40%
Firm A's common stock has a par value per share of $1, market value per share of $90, earnings per share of $5, dividends per share of $2, and a book value per share of $60. What is Firm A's dividend yield (rounded to one decimal)? $90 / $2 = 45.0 times $2 / $60 = 3.3% $2 / $5 = 40% $2 / $90 = 2.2%
$2 / $90 = 2.2%
Sales for Year 2 were $2,400,000. Accounts receivable was $200,000 at the end of Year 1 and $300,000 at the end of Year 2. The accounts receivable turnover for Year 2 (rounded to one decimal) was: $2,400,000 / $300,000 = 8.0% $2,400,000 / (($200,000 + $300,000) / 2) = 9.6 times $2,400,000 / (($200,000 + $300,000) / 2) = 9.6% $2,400,000 / $200,000 = 12.0 times
$2,400,000 / (($200,000 + $300,000) / 2) = 9.6 times
Total liabilities were $200,000 at the beginning of the year and $240,000 at the end of the year. Stockholders' equity was $300,000 at the beginning of the year and $400,000 at the end of the year. What was the debt ratio at the end of the year (rounded to one decimal)? $240,000 / $400,000 = 60% $240,000 / (($200,000 + $300,000 + $240,000 + $400,000) / 2) = 21.1% $240,000 / ($240,000 + $400,000) = 37.5% $240,000 / (($300,000 + $400,000) / 2) = 68.6%
$240,000 / ($240,000 + $400,000) = 37.5%
For Year 2, sales were $300,000 and cost of goods sold was $180,000. Inventories amounted to $20,000 at the end of Year 1 and $30,000 at the end of Year 2. The days' sales in inventory for Year 2 (rounded to one decimal) was: (($20,000 + $30,000) / 2) / ($180,000 / 365) = 50.7 days $30,000 / ($300,000 / 365) = 36.5 days $30,000 / ($180,000 / 365) = 60.8 days (($20,000 + $30,000) / 2) / ($300,000 / 365) = 30.4 days
$30,000 / ($180,000 / 365) = 60.8 days
Total liabilities were $330,000 at the beginning of the year and $300,000 at the end of the year. Stockholders' equity was $270,000 at the beginning of the year and $240,000 at the end of the year. What was the debt/equity ratio at the end of the year (rounded to one decimal)? $300,000 / (($270,000 + $240,000) / 2) = 117.6% ($330,000 + $300,000) / 2) / $240,000 = 131.3% $300,000 / $240,000 = 125% $300,000 / ($300,000 + $240,000) = 55.6%
$300,000 / $240,000 = 125%
Cost of goods sold for Year 2 was $300,000. Sales for Year 2 were $600,000. Inventory was $40,000 at the end of Year 1 and $60,000 at the end of Year 2. The inventory turnover for Year 2 (rounded to one decimal) was: $300,000 / (($40,000 + $60,000) / 2) = 6.0 times $600,000 / $60,000 = 10.0 times $300,000 / $60,000 = 5.0 times $600,000 / (($40,000 + $60,000) / 2) = 12.0 times
$300,000 / (($40,000 + $60,000) / 2) = 6.0 times
Firm B's common stock has a par value per share of $1, market value per share of $72, dividends per share of $4, earnings per share of $8, and a book value per share of $64. What is Firm B's dividend yield (rounded to one decimal)? $72 / $4 = 18.0 times $4 / $72 = 5.6% $4 / $64 = 6.3% $4 / $8 = 50%
$4 / $72 = 5.6%
Firm B's common stock has a par value per share of $1, market value per share of $72, dividends per share of $4, earnings per share of $8, and a book value per share of $64. What is Firm B's dividend payout ratio (rounded to one decimal)? $4 / $72 = 5.6% $4 / $8 = 50% $4 / $64 = 6.3% $8 / $4 = 2.0 times
$4 / $8 = 50%
Firm C's common stock has a par value per share of $10, earnings per share of $6, dividends per share of $5, a book value per share of $69, and a market value per share of $80. What is Firm C's dividend payout ratio (rounded to one decimal)? $5 / $80 = 6.3% $5 / $10 = 50% $5 / $6 = 83.3% $5 / $69 = 7.2%
$5 / $6 = 83.3%
Firm C's common stock has a par value per share of $10, earnings per share of $6, dividends per share of $5, a book value per share of $69, and a market value per share of $80. What is Firm C's dividend yield (rounded to one decimal)? $10 / $5 = 2.0 times $5 / $69 = 7.2% $5 / $80 = 6.3% $5 / $6 = 83.3%
$5 / $80 = 6.3%
Total liabilities were $650,000 at the beginning of the year and $600,000 at the end of the year. Stockholders' equity was $300,000 at the beginning of the year and $400,000 at the end of the year. What was the debt ratio at the end of the year (rounded to one decimal)? $600,000 / (($300,000 + $400,000) / 2) = 171.4% $600,000 / ($600,000 + $400,000) = 60% $600,000 / $400,000 = 150% $600,000 / (($650,000 + $300,000 + $600,000 + $400,000) / 2) = 61.5%
$600,000 / ($600,000 + $400,000) = 60%
Cost of goods sold for Year 2 was $600,000. Sales for Year 2 were $1,000,000. Inventory was $100,000 at the end of Year 1 and $150,000 at the end of Year 2. The inventory turnover for Year 2 (rounded to one decimal) was: $1,000,000 / $150,000 = 6.7 times $600,000 / (($100,000 + $150,000) / 2) = 4.8 times $1,000,000 / (($100,000 + $150,000) / 2) = 8.0 times $600,000 / $150,000 = 4.0 times
$600,000 / (($100,000 + $150,000) / 2) = 4.8 times
Sales for Year 1 and Year 2 amounted to $500,000 and $600,000, respectively. Plant and equipment was $150,000 at the end of Year 1 and $250,000 at the end of Year 2. The plant and equipment turnover for Year 2 (rounded to one decimal) was: (($500,000 + $600,000) / 2) / (($150,000 + $250,000) / 2) = 2.8 times (($500,000 + $600,000) / 2) / $250,000 = 2.2 times $600,000 / (($150,000 + $250,000) / 2) = 3.0 times $600,000 / $250,000) = 2.4 times
$600,000 / (($150,000 + $250,000) / 2) = 3.0 times
Sales were $500,000 in Year 1 and $600,000 in Year 2. Accounts receivable was $50,000 at the end of Year 1 and $30,000 at the end of Year 2. The accounts receivable turnover for Year 2 (rounded to one decimal) was: $600,000 / (($50,000 + $30,000) / 2) = 15.0% (($500,000 + $600,000) / 2) / (($50,000 + $30,000) / 2) = 13.8 times $600,000 / (($50,000 + $30,000) / 2) = 15.0 times (($500,000 + $600,000) / 2) / (($50,000 + $30,000) / 2) = 13.8%
$600,000 / (($50,000 + $30,000) / 2) = 15.0 times
Firm B's common stock has a par value per share of $1, market value per share of $72, dividends per share of $4, earnings per share of $8, and a book value per share of $64. What is Firm B's price/earnings ratio? $64 / $8 = 8.0 per share $72 / $4 = 18.0 per share $60 / $8 = 7.50 per share $72 / $8 = 9.0 per share
$72 / $8 = 9.0 per share
Firm A's common stock has a par value per share of $1, market value per share of $90, earnings per share of $5, dividends per share of $2, and a book value per share of $60. What is Firm A's price/earnings ratio? $60 / $5 = $12 per share $90 / $2 = $45 per share $90 / $5 = $18 per share $90 / $60 = $1.50 per share
$90 / $5 = $18 per share
Firm D had 20,000 shares of $50 par value and 6 percent cumulative preferred stock authorized, issued, and outstanding during Year 1 and Year 2 but did not pay any preferred or common stock dividends in either year. Net income was $800,000 in Year 1 and $900,000 in Year 2. What is Firm D's preferred dividend coverage ratio for Year 2 (rounded to one decimal)? (($800,000 + $900,000) / 2) / (20,000 x $50 x 6%) = 14.2 times $900,000 / (20,000 x $50) = 0.9 times $900,000 / (20,000 x $50 x 6%) = 15.0 times $900,000 / (20,000 x $50 x 6% x 2) = 7.5 times
$900,000 / (20,000 x $50 x 6%) = 15.0 times
Firm H's earnings before income taxes for the year was $180,000, cost of goods sold was $240,000, interest expense was $30,000, and income tax expense was $60,000. What was Firm H's times interest earned for the year (rounded to one decimal)? ($180,000 + $30,000 + $60,000) / $30,000 = 9.0 times ($180,000 + $30,000) / $30,000 = 7.0 times ($180,000 + $60,000) / $30,000 = 8.0 times ($240,000 - $30,000 - $60,000) / $30,000 = 5.0 times
($180,000 + $30,000) / $30,000 = 7.0 times
If a firm's debt ratio was 25%, its debt/equity ratio would be: A. 25%. B. 50%. C. 33.33%. D. 75%.
33.33%.
Price/Earning (P/E) Ratio Facts
Analysts sometimes use expected future earnings per share and the current market price in the calculation to evaluate the prospects for changes in the stock's market price. The P/E ratio is one of the most important measures used by investors to evaluate the market price of a firm's common stock. Diluted earnings per share is usually the denominator of the P/E calculation. The P/E ratio is a measure of the relative expensiveness of a company's common stock. P/E ratios are shown in the stock listing tables of The Wall Street Journal. The P/E ratio is sometimes referred to as earnings multiple. Firms with high P/E ratios generally have strong investor confidence. A high P/E ratio usually means that investors expect the firm to have strong future earnings and dividend growth. Low P/E ratios usually indicate poor earnings expectations. An above-average P/E ratio indicates that the common stock price is high relative to the firm's current earnings. P/E ratios are significantly influenced by the company's reported earnings. A low P/E ratio for a well-established company may be an indicator that the company's stock is undervalued.
Suppliers or potential suppliers/creditors of a firm consider which of the following to be more important than the aggregate working capital or liquidity ratios of the firm? Select All The firm's ability to fund its day-to-day operations Cash discounts availed by the firm for prompt payments made The firm's ability to meet its short-term financial obligations Current and recent payment experience of the firm
Cash discounts availed by the firm for prompt payments made Current and recent payment experience of the firm
Which of the following is(are) an example of a measure of leverage? A. Debt yield. B. Debt payout ratio. C. Preferred dividend coverage ratio. D. Debt/equity ratio.
Debt/equity ratio.
Identify the correct statements about vertical common size financial statement analysis. Select All Depreciation expense is expressed as a percentage of total expenses. Each stockholders' equity item is expressed as a percentage of total assets. Each financial statement is examined from top to bottom on an annual basis. Several years' financial data are stated in terms of a base year. Each asset is expressed as a percentage of total assets.
Each stockholders' equity item is expressed as a percentage of total assets. Each financial statement is examined from top to bottom on an annual basis. Each asset is expressed as a percentage of total assets.
Identify a true statement about a leveraged buyout. In a leveraged buyout, the company goes heavily into debt to obtain the funds needed to buy the shares of the public stockholders. In a leveraged buyout, one firm acquires another by issuing stock of the surviving company to the stockholders of the firm being acquired. In a leveraged buyout, there is a significant change in the top management and operations of the acquired company. In a leveraged buyout, the debt issued is usually considered to be of low risk.
In a leveraged buyout, the company goes heavily into debt to obtain the funds needed to buy the shares of the public stockholders.
Credit-rating firms gather and report data about which of the following? Select All Industries Segments of the economy Individual consumers Individual companies
Industries Segments of the economy Individual companies
Which of these statements regarding financial leverage are true? Select All It adds risk to the operation of the firm. It refers to the use of equity to finance the assets of the firm. It magnifies the return to the owners (ROE) relative to the return on assets (ROI). It protects the firm from bankruptcy.
It adds risk to the operation of the firm. It magnifies the return to the owners (ROE) relative to the return on assets (ROI).
Which statements regarding financial leverage are true? Select All It can lead to bankruptcy if the firm cannot generate enough cash to make payments on the principal and interest of its loans. It adds risk to the operation of the firm. It is considered positive if the return on investment (ROI) earned on borrowed funds is less than the cost of borrowing. It can be arranged via debt and preferred stock, because of their fixed interest cost (or dividend rate).
It can lead to bankruptcy if the firm cannot generate enough cash to make payments on the principal and interest of its loans. It adds risk to the operation of the firm. It can be arranged via debt and preferred stock, because of their fixed interest cost (or dividend rate).
The difference between the inventory valuation as reported under LIFO and the amount that would have been reported under FIFO is called the Blank______. FIFO reserve gross profit LIFO reserve cost of goods sold
LIFO reserve
What physical or combined physical/financial measures of activity are sometimes disclosed in the notes to the financial statements? Select All Number of employees Accumulated depreciation Sales in units Gross profit per square foot of selling space
Number of employees Sales in units Gross profit per square foot of selling space
Why is operating income frequently substituted for net income in the calculation of ROI and ROE? Operating income is more closely related to a company's price/earnings ratio. Operating income excludes depreciation and amortization expenses and thus provides a better measure of the firm's cash generating ability. Operating income excludes interest expense, which varies from firm to firm based on their capital structure decisions. Operating income excludes income tax expense, which varies from firm to firm based on country-specific tax rates. Operating income is a more direct measure of the results of a firm's activities. Operating income excludes the effects of discontinued operations and thus provides a more forward looking measure of the firm's profitability.
Operating income excludes income tax expense, which varies from firm to firm based on country-specific tax rates. Operating income excludes the effects of discontinued operations and thus provides a more forward looking measure of the firm's profitability. Operating income is a more direct measure of the results of a firm's activities. Operating income excludes interest expense, which varies from firm to firm based on their capital structure decisions.
Which of the following is not a category of financial statement ratios? A. Financial leverage. B. Liquidity. C. Profitability. D. Prospectus.
Prospectus.
Financial leverage magnifies a firm's (ROI/ROE) relative to its (ROI/ROE).
ROE ROI
Identify the correct statements about vertical common size financial statement analysis. Select All The balance sheet and income statement are expressed in a percentage format. Total current assets are expressed as a percentage of total assets. Each item on the income statement is expressed as a percentage of sales. Each liability is expressed as a percentage of total liabilities.
The balance sheet and income statement are expressed in a percentage format. Total current assets are expressed as a percentage of total assets. Each item on the income statement is expressed as a percentage of sales.
How do debt and preferred stock provide financial leverage? Select All The interest on debt can be deducted as an expense, lowering income taxes. They have a fixed interest cost (or dividend rate). Preferred stock dividends can be deducted as an expense. Fluctuations in the interest rate will magnify ROE.
The interest on debt can be deducted as an expense, lowering income taxes. They have a fixed interest cost (or dividend rate).
Identify the true statements about credit-rating firms. Multiple may apply They do not allow the companies being reported on to see the data in their files. They evaluate the common and preferred stock issues of publicly traded companies. They assign ratings to only speculative bonds and stocks. They usually have a rating system and assign a credit risk value based on that system.
They evaluate the common and preferred stock issues of publicly traded companies. They usually have a rating system and assign a credit risk value based on that system.
Identify the true statements about extra dividends. Select All They are considered to be stable, or gradually changing in nature. They may be declared and paid after an especially profitable year. They indicate to stockholders that they should not expect to receive the larger amount every year. They are likely to be incorporated as part of the regular dividend in the future.
They may be declared and paid after an especially profitable term-62year. They indicate to stockholders that they should not expect to receive the larger amount every year.
What indicators help suppliers and creditors judge the liquidity of a company? Multiple may apply Whether the company is taking all available cash discounts for prompt payment How the company is portrayed in Dun & Bradstreet reports Whether the company has a favorable price/earnings ratio How promptly the company has been paying its current and recent bills
Whether the company is taking all available cash discounts for prompt payment How the company is portrayed in Dun & Bradstreet reports How promptly the company has been paying its current and recent bills
A leveraged buyout refers to: A. one firm issues stock to take over another firm. B. one firm trades its stock for the stock of another firm. C. a firm goes heavily into debt in order to obtain the funds to purchase the shares of the public stockholders and thus take the firm private. D. one firm pays cash for the shares of a takeover firm's shares.
a firm goes heavily into debt in order to obtain the funds to purchase the shares of the public stockholders and thus take the firm private.
Management's use of resources can best be evaluated by focusing on measures of: A. liquidity. B. activity. C. leverage. D. book value.
activity
The (pre/after) -tax cost of debt is its interest rate multiplied by the complement of the firm's tax rate.
after
A company desiring to increase its total asset turnover could do so by using: an accelerated depreciation method and the LIFO cost flow assumption. the straight-line depreciation method and the LIFO cost flow assumption. an accelerated depreciation method and the FIFO cost flow assumption. the straight-line depreciation method and the FIFO cost-flow assumption.
an accelerated depreciation method and the LIFO cost flow assumption.
Financial leverage: A. arises because most borrowed funds have a fixed interest rate. B. arises because most borrowed funds have a variable interest rate. C. usually has no bearing on the risk associated with a company. D. is a concept that does not apply to individuals.
arises because most borrowed funds have a fixed interest rate.
If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be: A. less than 10. B. between 10 and 25. C. between 25 and 40. D. over 40.
between 10 and 25.
To calculate the inventory turnover, you divide (sales/cost of goods sold) by the (beginning/ending/average) inventory.
cost of goods sold average
Financial leverage refers to the use of (debt/equity/revenues) to finance the assets of an entity.
debt
The comparison of activity measures of different companies is complicated by the fact that: A. different inventory cost flow assumptions may be used. B. dollar amounts of assets may be significantly different. C. only one of the companies may have preferred stock outstanding. D. the number of shares of common stock issued may be significantly different.
different inventory cost flow assumptions may be used.
When a corporation has both common stock and preferred stock outstanding: A. dividends on preferred stock are paid only if the company has current earnings. B. dividends on preferred stock must be paid before dividends on common stock can be paid. C. preferred stockholders receive the same dividend per share as common stockholders. D. dividends on preferred stock are paid only if dividends are to be paid on the common stock.
dividends on preferred stock must be paid before dividends on common stock can be paid.
Another term for the price/earnings ratio is: A. cost ratio. B. sales multiple. C. earnings multiple. D. profit ratio.
earnings multiple.
To calculate the days' sales in accounts receivable, you divide the (beginning/ending/average) accounts receivable by the average day's (sales/cost of goods sold).
ending sales
A common size income statement: A. uses the same dollar amount of revenues for each year. B. expresses items as a percentage of revenues. C. makes comparisons between years more difficult. D. is useful in estimating the impact of inflation.
expresses items as a percentage of revenues.
In (horizontal/vertical) common size analysis, the base year selected impacts how the trends of a company's financial results in recent years are portrayed.
horizontal
The use of an accelerated depreciation method and the LIFO inventory cost flow assumption will usually (increase/decrease) a company's total asset turnover relative to using the straight-line method and FIFO.
increase
The price/earnings ratio: A. is a measure of the relative expensiveness of a firm's common stock. B. does not usually change by more than 1.0 (e.g. 8.2 to 9.2) during the year. C. can be used to determine the cash dividend to be received during the year. D. is calculated by dividing the earnings multiple by net income.
is a measure of the relative expensiveness of a firm's common stock.
The inventory turnover calculation: A. is wrong unless cost of goods sold is used in the numerator. B. is wrong unless sales is used in the numerator. C. is an alternative way of expressing the number of days' sales in inventory. D. requires knowledge of the inventory cost flow assumption being used.
is an alternative way of expressing the number of days' sales in inventory.
Book value per share of common stock of a manufacturing company: A. is not a very useful measure most of the time. B. is calculated by dividing market value per share by earnings per share. C. reflects the fair value of the company's stock. D. is the same as the total balance sheet asset value per share of common stock.
is not a very useful measure most of the time.
A transaction in which the present top management of a publicly held firm buys the stock of the nonmanagement stockholders and the firm becomes "privately owned" is known as a(n) Blank______. merger leveraged buyout acquisition hostile takeover
leveraged buyout
Because firms within a given industry may vary considerably over time in terms of their Blank______, it is difficult to develop reliable rules of thumb for the evaluation of ratio results. Select All quality of upper management personnel life cycle stage of development relative scale of operations cost and capital structures relative scale of operations selected accounting methods market segmentation strategies
life cycle stage of development relative scale of operations cost and capital structures relative scale of operations selected accounting methods market segmentation strategies
The ratios used to facilitate the interpretation of an entity's financial position and results of operations can be grouped into four (4) categories: liquidity, activity, profitability, and debt activity, productivity, debt, and cash flow liquidity, profitability, debt, and per share liquidity, activity, common size, and profitability
liquidity, activity, profitability, and debt
The LIFO reserve: may be reported as a cost of goods sold adjustment in the income statement. must be reported as a diluted earnings per share adjustment in the income statement. must be reported as an inventory adjustment in the balance sheet. may be disclosed in the notes to the financial statements.
may be disclosed in the notes to the financial statements.
A potential creditor's judgment about granting credit would be most influenced by the potential customer's: A. current ratio at the end of the prior fiscal year. B. most recent acid-test ratio. C. trend of acid-test ratio over the past three years. D. practice with respect to taking cash discounts offered by current suppliers.
practice with respect to taking cash discounts offered by current suppliers.
The P/E ratio is calculated by dividing the (dividends/price/earnings) per share of common stock by the (dividends/price/earnings) per share of common stock.
price earnings
A management that wanted to increase the financial leverage of its firm would: A. raise additional capital by selling common stock. B. use excess cash to purchase preferred stock for the treasury. C. raise additional capital by selling fixed interest rate long-term bonds. D. try to increase its ROI by increasing asset turnover.
raise additional capital by selling fixed interest rate long-term bonds.
Dividends that are stable, or gradually changing, and periodic in nature are known as Blank______ dividends. ad hoc DuPont regular special
regular
An individual interested in making a judgment about the profitability of a company should: A. review the trend of working capital for several years. B. calculate the company's ROI for the most recent year. C. review the trend of the company's ROI for several years. D. compare the company's ROI for the most recent year with the industry average ROI for the most recent year.
review the trend of the company's ROI for several years.
When a firm has financial leverage: A. ROI will be greater than ROE. B. ROI will usually be less than it would be without leverage. C. risk is greater than if there wasn't any leverage. D. the firm will always have a higher ROE than it would without leverage.
risk is greater than if there wasn't any leverage.
Examples of physical or combined physical/financial measures of activity that are sometimes disclosed in the notes to the financial statements include: Select All sales dollars per employee operating income per employee cost of goods sold plant operating expenses per square foot
sales dollars per employee operating income per employee plant operating expenses per square foot number of employees sales in units gross profit per square foot of selling space
Asset turnover calculations: A. are made by dividing the average asset balance during the year by the sales for the year. B. are made by dividing sales for the year by the asset balance at the end of the year. C. communicate information about how promptly the entity pays its bills. D. should be evaluated by observing the turnover trend over a period of time.
should be evaluated by observing the turnover trend over a period of time.
An entity's current ratio will be influenced by: A. the inventory cost flow assumption used. B. writing off an overdue account receivable against the allowance for uncollectible accounts. C. the depreciation method used. D. issuance of a stock dividend.
the inventory cost flow assumption used.
Earnings multiple is another term used to describe the price/earnings ratio. This term merely reflects that: the market price of stock is equal to the dividends per share multiplied by the P/E ratio. the market price of stock is equal to the earnings per share divided by the P/E ratio. the market price of stock is equal to the earnings per share multiplied by the P/E ratio. the book value of stock is equal to the earnings per share multiplied by the P/E ratio.
the market price of stock is equal to the earnings per share multiplied by the P/E ratio.
The dividend payout ratio describes: A. the proportion of earnings paid as dividends. B. the relationship of dividends per share to market price per share. C. the percentage change in dividends this year compared to last year. D. dividends as a percentage of the price/earnings ratio.
the proportion of earnings paid as dividends.
A higher P/E ratio means that: A. the stock is more reasonably priced. B. the stock is relatively expensive. C. investors are wary of the stock. D. earnings are expected to decrease.
the stock is relatively expensive.
The debt/equity ratio is usually calculated by dividing the Blank______. total liabilities by total stockholders' equity average liabilities by total stockholders' equity total liabilities by total liabilities + stockholders' equity total liabilities by average liabilities + stockholders' equity
total liabilities by total stockholders' equity
