FIN 320 Exam 3
Financial leverage
Average Assets / Average Equity
Disaggregation
DeGeorge: Gross profit Operating retention Operating margin Treasury retention Profit margin Remaining DuPont: Asset Turnover Return on Assets Financial Leverage Return on Equity
Increase in effective tax rate
Decrease in treasury retention
Loss on retirement of debt
Decrease in treasury retention
Reduction in price of product sold
Decreased gross profit margin
Loss of a lawsuit
Decreased operating margin
Operating efficiency of a simple business
EBIT margin
Which of the following items would be reported net and pre tax?
Gain or loss on sale of fixed assets
Which of the following items would be reported gross and pretax as opposed to net and after tax?
Selling general and administrative expense
Effective use of assets
asset turnover
Significant capital expenditures
decrease in asset turnover
Temporary shutdown for coronavirus
decrease in asset turnover
Decrease in debt
decrease in financial leverage / decrease in ROE
Increase in cost of product sold
decreased gross profit margin
Which of the following items would be reported net and after tax as opposed to gross and pretax?
discontinued operations
Risk/confidence
financial leverage
Gross Profit
gross profit / total revenues
Production efficiency (value added)
gross profit margin
A company has a very low PE ratio (2 times). This most likely indicates that
historic earnings are unusually high
Decrease in research and development
improved operating retention
Decrease in effective tax rate
increased profit margin
The price to book ratio is closest to
market value of equity (price) / book value of equity
The price to earnings ratio is closest to
market value of equity (price) / net earnings
What is the enterprise value of the company?
market value of equity + debt - marketable securities
Profit margin
net income / total revenue
Significant sale of capital assets
no impact on recurring NICO
Operating efficiency of a complex business
operating margin
Treasury retention
profit margin / Operating margin
Effective asset selection (investment decisions)
return on assets
Overall profitability
return on equity
Non-production operating efficiency
Operating Retention
Operating margin
Operating profit / total revenues
Overall efficiency
Profit margin
Asset turnover
Total Revenue / Average Assets
Reduction in research and development
Improved operating retention
Increase in borrowing
Increased financial leverage
Reduction in cost of product sold
Increased gross profit margin
Return on assets
Net Income / Average Assets
Return on equity
Net Income / Average Equity
Discontinued operations
No impact on recurring NICO
Treasury function efficiency
Non-Operating Retention
Operating retention
Operating Margin / Gross Profit Margin
On 12/7/2021, AutoZone was trading at just over $2,000.00 per share representing a PE ratio of 21.1 times earnings. The company also has a ROE that is negative. The reason for this odd ratio combination is that
The company has bought back significant treasury stock and has negative equity (or lawsuits)
Profit margin is 5%, asset turnover is 1.5, financial leverage is 3.0, earnings per share are $2.00 and there were no dividends. Which of the following statements is correct?
The sustainable growth rate is greater than the return on assets
