FIN 315 ch.3

a firm with a profit margin of 6.8% generates ____ cents in net income for every one dollar in sales

6.8

Alpha co. has COGS of $77m, net income of $9.6m, sales f $120m, and total assets of $150m. A common-size income statement will show SOGA of _____ percent and a new profit of _____ percent

77m/120m = 64.2% 9.6m/120m = 8.0%

if a company's common size income statement shows a lower percentage for COGS this period compared to last period, the company may be controlling its costs well or it has _____

raised its prices relative to costs

which of the following groups are most interested in liquidity ratios?

supplier; bankers

what does a current ratio of 1.2 mean?

the firm has $1.20 in current assets for ever $1 fixed in current liabilities

how is the inventory turnover ratio computed?

COGS/inventories

although _______ ______ are often por reflections of reality, they are often the best information available

accounting numbers

which of the following are sources of cash?

an increase in notes payable; a decrease in accounts receivable

which of the following items are among the items used to compute the current ratio?

cash; accounts payable

the current ratio shows the relationship between ____

current assets and current liabilities

which of the following are most likely to create problems when comparing financial statements for multiple firms?

differing accounting methods; differing fiscal years

which two of the following are most likely to create problems when comparing financial statements for multiple firms?

differing fiscal years; differing account methods

a common-base year financial statement presents items relative to a certain base, which is the:

dollar amount of each item during a common base year

a times interest earned (TIE) ratio of 3.5 times means a firm has _____ that is(are) 3.5 ties greater than the firms interest expense

earnings before interest and taxes

which of the following are uses of cash?

increases in property,plant and equipment; decrease in accounts payable and increases in inventory

current assets on the common-size balance sheet over the past three years have increased from 32-35 percent while current liabilities have decreased. from 29 to 25%. this indicates the firm has increased its ____

liquidity

whenever _______ information is available, it should be used inted of accounting data.

market

how is PE ratio computed

market price per share / earnings per share

what is the debt equity ratio with 3.5m in total assets and 1.4m in equity?

(3.5-1.4)/1.4 = 1.50

return on assets is 15%, equity multiplier is 1.4, what is the return on equity?

.15(1.4) = .21

alpha manufacturing has interest expense f $1.2m, total assets of $184m, sales of 17.6m, long-term debt of 16.4m, and net income $15m. how will interest expense be recorded in the common-size income statement?

1.2m/17.6m = 6.82

the net income as shown in the common-size income statement of omega industries for the past three years increased from 3% to 6%. this indicates that the firm is increasing its_____

profitability

BC corporation has net income of $176,000, sales of $1,982,000 and total assets of $2.24m. what is the return on assets?

176,000/2.24 = 7.86%

BC corp. has 1,800 shares outstanding and earned $2,700 last year on assets of $2m and equity of $1.5m. what is the PE ration if the stock is currently selling at $18 per share?

18/(2700/1800) = 12

vera's has earnings per share of $3 and dividends per share of $1.20. the stock sells for $30 a share. what is the PE ratio?

30/3 = 10

nestor's has met income of $315,000 total sales of $3.52 million, total assets of $4.4m and total equity of $1.98m. what is the return on equity?

315,000/1.98 = 15.91

AD co. has net income of $4,250 on total sales of $128,400. Total assets are $145,000. what is the PM?

4,250/128,400 = 3.31%