ch 11 sb

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. Firm C's dividend payout ratio (rounded to one decimal) is:

$5 / $6 = 83.3%

It is difficult to develop reliable rules of thumb for the evaluation of ratio results because firms within a given industry may vary considerably over time in terms of their:

selected accounting methods market segmentation strategies

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 earnings per share multiplied by the P/E ratio.

To calculate the days' sales in inventory, you divide the (beginning/ending/average) inventory by the average day's (sales/CGS).

Ending CGS

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 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 Debt or financial leverage

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 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) _____.

leveraged buyout

Sales for Year 2 were $1,400,000. Accounts receivable was $350,000 at the end of Year 1 and $400,000 at the end of Year 2. The days' sales in accounts receivable for Year 2 (rounded to one decimal) was:

$400,000 / ($1,400,000 / 365) = 104.3 days

Cost of goods sold was $400,000 and $500,000 in Year 1 and Year 2, respectively. Sales for Year 2 were $1,000,000. Inventory was $60,000 at the end of Year 1 and $40,000 at the end of Year 2. The inventory turnover for Year 2 (rounded to one decimal) was:

$500,000 / (($60,000 + $40,000) / 2) = 10.0 times

The difference between the inventory valuation as reported under LIFO and the amount that would have been reported under FIFO is called the LIFO (backlog/reserve/stockpile).

Reserve

To calculate the accounts receivable turnover, you divide (sales/CGS) by the (beginning/ending/average) accounts receivable.

Sales Average

Dividends that are stable, or gradually changing, and periodic in nature are known as _____ dividends.

regular

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. Firm A's dividend yield (rounded to one decimal) is:

$2 / $90 = 2.2%

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. Firm A's price/earnings ratio is:

$90 / $5 = $18 per share

Operating income is frequently substituted for net income in the calculation of ROI and ROE because:

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. operating income excludes the effects of discontinued operations and thus provides a more forward looking measure of the firm's profitability.

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. The debt ratio at the end of the year (rounded to one decimal) was:

$600,000 / ($600,000 + $400,000) = 60%

Identify the true statements about extra dividends.

They indicate to stockholders that they should not expect to receive the larger amount every year. They may be declared and paid after an especially profitable year.

Sales were $2,000,000 in Year 1 and $2,400,000 in Year 2. Accounts receivable was $400,000 at the end of Year 1 and $200,000 at the end of Year 2. The accounts receivable turnover for Year 2 (rounded to one decimal) was:

$2,400,000 / (($400,000 + $200,000) / 2) = 8.0 times

Which of the following statements are true regarding the price/earning (P/E) ratio?

The P/E ratio reflects the amount an average investor is willing to pay per dollar of current earnings for a company. The P/E ratio should not be the sole, or even principal, consideration in an investment decision.

It is difficult to develop reliable rules of thumb for the evaluation of ratio results because firms within a given industry may vary considerably over time in terms of their:

life cycle stage of development relative scale of operations