Question 3(1 point) Which of the following is not a potential problem when developing a trend analysis based upon percentage changes from year-to-year?Question 3 options: 1) The lack of reference to a...

Question 3(1 point)

Which of the following isnota potential problem when developing a trend analysis based upon percentage changes from year-to-year?Question 3 options:

	1) The lack of reference to a base dollar amount in order to make valid inferences on the relative magnitude of the changes.
	2) A negative amount in Year 2 of a balance sheet item and a positive amount in Year 3.
	3) Comparing yearly amounts with an average computed over all years to highlight unusual changes.
	4) A change in LT Debt from $100,000 in Year 3 to $0 in Year 4.

Question 4(1 point)

For a technology dependent firm, a past trend is a good predictor of future trends when:Question 4 options:

	1) The past trends are similar to industry past trends.
	2) The drivers of past firm performance will be unchanged over the forecast period.
	3) When there is considerable uncertainty about the industry outlook.
	4) All of the above statements are true.

Question 5(1 point)

Which of the following istrueof common-size income statements?Question 5 options:

	1) Each income statement item is dividend by sales.
	2) Income statement accounts are presented as a percentage of total assets.
	3) A common-size comparison results in more dissimilarities than when comparing on a dollar basis.
	4) Common size income statements can’t be used to compare firms of different size.
	5) All of the above are income statement items.

Question 6(1 point)

Which of the following statements isfalseas it relates to common-size balance sheets?
I. Examining a firm’s current assets and long term assets as a percentage of total assets can help determine whether a company is becoming more or less liquid.
II. A firm with an increasing dollar amount of debt but a decreasing percentage of debt to assets is relying more heavily on debt.
III. Common size balance sheets are determined by dividing items by total sales.Question 6 options:

	1) I only
	2) II only
	3) I and II
	4) II and III
	5) I, II, and III

Question 7(1 point)

Which of the following aretrueas it relates to common size statements?Question 7 options:

	1) Common size analysis is useful in identifying company trends across time but not in comparing a firm to an industry.
	2) A common size analysis of ROE cannot provide insight into why a firm’s ROE is falling when the industry average has been increasing.
	3) Common size analysis assists comparison of companies across firms and over time.
	4) Common size analysis can be developed by dividing all income statement and balance sheet items by either total sales or total assets.

Question 8(1 point)

Ratio analysis is useful in evaluating a firm:

Question 8 options:

	1) Against a peer group of companies
	2) When assessing how the firm has changed over time
	3) According to major categories of ratios such as profitability, liquidity, leverage and asset efficiency
	4) All of the above

Question 9(1 point)

The Return on Equity Model expresses:Question 9 options:

	1) Return on equity in terms of the firm’s return on assets and excess from liquidity
	2) Return on assets in terms of the firm’s profitability, asset efficiency, and leverage
	3) Return on equity in terms of the firm’s profitability, asset efficiency, and leverage.
	4) Return on invested capital in terms of the firm’s profitability, leverage, and working capital management.

Question 10(1 point)

Which of the following would increase a firm’s return on equity?Question 10 options:

	1) A decrease in the dividend payout ratio
	2) An increase in net fixed assets
	3) A decrease in the amount of debt
	4) A decrease in interest expense

Question 11(1 point)

Link Leisure has an ROE below the industry average, but their profit margin and financial leverage are both above the industry average.
Which of the following statements istrue

about Link Leisure?Question 11 options:

	1) Its dividend payout must be equal to the industry average.
	2) Its total asset turnover must be lower than the industry average.
	3) Its return on assets must be higher than the industry average.
	4) Its times interest earned ratio must be below the industry average.

Question 12(1 point)

Elemental Labs aims to strengthen its financial performance before its anticipated IPO.
Which of the following changes would improve its return on equity, assuming sales remain constant?Question 12 options:

	1) An increase in inventories.
	2) An increase in interest expense
	3) A decrease in accounts receivable
	4) An increase in marketable securities

Question 13(1 point)

Use the following statements to answer the question below:

1.Ratios are always calculated in the same manner across firms and financial databases.

2. Comparing a company’s ratios to industry averages can provide a useful indicator of how a company measures up to its peers.

3. When comparing firms in the same industry, differences in product-lines, size, and business segments can distort the comparison.

4. When comparing a firm to its competitors, a comparison of ratios, rather than dollar items, is beneficial because they are not distorted by inflation.

5. Seasonal variation is smoothed out by calculating annual ratios.

Which of the above statements arefalse?

Question 13 options:

	1) Statement 1
	2) Statements 1, 4, and 5
	3) Statements 4 and 5
	4) Statement 5

Question 14(1 point)

The following data pertain to Farzona Labs:

	2015	2016
Net Revenue	$100,000	$135,000
Net Income	$23,000	$28,750
Total Assets	$48,000	$52,800

Calculate the dollar and percentage change in 2016 using trend analysis, and 2015 as the base year.Question 14 options:

	1) Revenue: $35,000, 35%; Net Income: $5,750, 25%; Total Assets: $4,800; 10%
	2) Revenue: $35,000, 35%; Net Income: -$5,750, -20%; Total Assets: $4,800; 10%
	3) Revenue: -$35,000, 35%; Net Income: $5,750, 5.75%; Total Assets: $4,800; 4.8%
	4) Revenue: $35,000, 3.5%; Net Income: $5,750, 5.75%; Total Assets: $4,800; 4.8%

Question 15(1 point)

The following data pertain to Keahi Inc.:

Net Revenue	$245,000
Net Income	$22,050
Total Assets	$188,462
Total Liabilities	$70,673
Stockholders’ Equity	$117,789

Calculate the Return on assets (ROA), return on sales (ROS), total asset turnover (TA), and the financial leverage (LEV) for Keahi.Question 15 options:

	1) ROA: 62.5%; ROS: 10.0%; TA: 8.5; LEV: : 1.6;
	2) ROA: 10.0%; ROS: 10.0%; TA: 2.5; LEV: : 2.5;
	3) ROA: 18.7%; ROS: 9.0%; TA: 1.6; LEV: : 1.3;
	4) ROA: 11.7%; ROS: 9.0%; TA: 1.3; LEV: : 1.6;

Question 16(1 point)

DataWeb reported the following in the most recent year of operations:

Earnings per Share	$5.60
Dividends per Share	$1.68
Stock price	$84.00

Compute the Price-earnings ratio (P/E), dividend yield (DY) and dividend payout ratio (PAYO).Question 16 options:

	1) Price-earnings ratio: 15; Dividend Yield: 2%; Dividend payout ratio: 30%
	2) Price-earnings ratio: 15; Dividend Yield: 30%; Dividend payout ratio: 2%
	3) Price-earnings ratio: 50; Dividend Yield: 30%; Dividend payout ratio: 2%
	4) Price-earnings ratio: 50; Dividend Yield: 2%; Dividend payout ratio: 30%

Question 17(1 point)

A firm has an asset turnover 1.50. This means that that firm has $1.0 dollars in assets for every:Question 17 options:

	1) $0.667 in total sales
	2) $0.333 in total sales
	3) $1.50 in total sales
	4) $1.00 in total sales.

Question 18(1 point)

Compute BikeNet’s quick ratio (Quick) and times-interest-earned (TIE) ratio:Question 18 options:

	1) Quick: 1.47, TIE: 3.03
	2) Quick: 3.59, TIE: 3.29
	3) Quick: 5.13, TIE: 3.03
	4) Quick: 8.33, TIE: 2.29

Question 19(1 point)

Compute BikeNet’s current ratio (C/R) and financial leverage (LEV) ratio:Question 19 options:

	1) C/R: 5.58, LEV: 1.30
	2) C/R: 5.58, LEV: 1.12
	3) C/R: 3.59, LEV: 1.30
	4) C/R: 4.34, LEV: 1.00

Question 20(1 point)

Compute BikeNet’s Asset turnover (A/T), Receivable turnover (R/T), and Inventory turnover (I/T):Question 20 options:

	1) A/T: 1.41, R/T: 3.44, I/T: 3.36
	2) A/T: 0.87, R/T: 2.93, I/T: 3.36
	3) A/T: 0.87, R/T: 3.44, I/T: 3.36
	4) A/T: 0.87, R/T: 3.44, I/T: 3.95 Answer:C Asset turnover = Net sales / TA = $723,000 / $833,000 = 0.87 Receivables turnover = Net sales / AR = $723,000 / $210,000 = 3.44 Inventory turnover = CGS / Inventory = $614,550 / $183,000 = 3.36 Topic: Financial Ratios TA 3 Level of Difficulty: EASY

Question 21(1 point)

Compute BikeNet’s return on assets (ROA), return on sales (ROS) and return on equity (ROE):Question 21 options:

	1) ROA: 15.2%, ROS: 10.4%, ROE: 11.8%
	2) ROA: 9.1%, ROS: 13.2%, ROE: 11.8%
	3) ROA: 9.1%, ROS: 10.4%, ROE: 10.2%
	4) ROA: 9.1%, ROS: 10.4%, ROE: 11.8% Answer:D Return on assets (ROA) = Net income / Total assets = $75,450 / $833,000 = 9.1% Return on sales (ROS) = Net income / Net sales = $75,450 / $723,000 = 10.4% Return on equity (ROE) = (Net income – Preferred dividends) / Stockholders’ equity = ($75,450 - $0) / $641,000 = 11.8% Problems Topic: Common Size TA 2 Level of Difficulty: EASY

Question 22(1 point)

Elemental Labs reported the following end of year statements:

Net Income
Revenue	165,000
Cost of goods sold	132,500
Selling, general & administrative	13,200
Earnings before interest & taxes	19,300
Interest expense	7,200
Earnings before taxes (EBT)	12,100
Taxes (40%)	4,840
Net Income	7,260

Balance Sheet
Assets		Liabilities
Cash	$7,950	Current liabilities	$33,900
Accounts Receivable	34,500	Long term debt	26,300
Inventory	24,800	Total Liabilities	$60,200
Fixed Assets	30,000	Stockholders’ Equity
		Common stock	8,350
	______	Retained earnings	28,700
Total Assets	$97,250	Total Liabilities & Equity	$97,250

Question 22 options:

	1) Calculate the indicated ratios for Elemental. No notes payable are held by the company. Elemental Industry Current ratio 1.3 Inventory turnover ratio 5.2 Total asset turnover 3.3 Return on assets 4.1%
	2) Show the decomposition of return on equity for Elemental and the Industry. Elemental Industry ROS x AT x LEV =
	3) How does Elemental compare to the industry? Answer: a. Elemental Industry Current ratio 2.0 1.3 Inventory turnover ratio 5.3 5.2 Total asset turnover 1.7 3.3 Return on assets 7.5% 4.1% Return on sales

Question 23(1 point)

The following data pertain to the DeLancey Corporation:

Net Income
Revenue	786,100
Expenses	710,200
Net Income	75,900

Balance Sheet
		Total Liabilities	120,000
		Total Stockholders’ Equity	195,000
Total Assets	$315,000	Total Liabilities & Equity	$315,000

Question 23 options:

	1) Show the decomposition of the return on equity.
	2) Compute the return on assets.
	3) Comment on the company's use of debt and performance relative to the industry. Industry Return on Sales (ROS) 7.0% Asset Turn (AT) 0.80 LEV 3.00 Answer: a. and b. Delancey Industry Return on Sales= Net income/Sales 9.7% x 7.0% x

Question 24(1 point)

Consider the information below for Colgate-Palmolive, Company and its industry.

USD in millions
Colgate-Palmolive	2012	2013	2014	2015
Revenue	16,734	17,085	17,420	17,277
Net income	2,431	2,472	2,241	2,180
Total Assets	12,724	13,394	13,876	13,459
Shareholders’ Equity	6,953	7,163	7,303	7,917
Industry	2012	2013	2014	2015
Return on Sales (ROS)				10.58%
Asset Turnover (AT)				0.74
Financial Leverage (LEV)				2.28
Return on Equity (ROE)				17.85%
Return on Assets (ROA)				7.83%

Question 24 options:

	1) Calculate the return on assets and the return on equity for each year.
	2) Discuss the changes in ret urns from year to year using the decomposition of ROE.
	3) Comment on Colgate-Palmolives’ ROE in 2015 relative to the industry. Answer: a. Industry 2012 2013 2014 2015 Return on Sales (ROS) 14.5% 14.5% 12.9% 10.58% Asset Turnover (AT) 1.32 1.28