Question 1

The computation of the additional shares to be issued on the exercise of stock options assumes that the firm would repurchase common shares on the open market using an
Amount equal to the sum of all the following except:

Accepted Answer

The sum of all the other factors would be used to calculate the additional shares to be issued, which would then be subtracted from the total number of shares outstanding to determine the net incremental shares issued. Therefore, the additional shares to be issued would not include this amount.

Question 2

In order to measure how profitable a firm is in generating a return for its common shareholders,a financial analyst would examine the return on _____________________________________________.

Accepted Answer

The answer of In order to measure how profitable a...

Question 3

Ramos Company
Ramos Company included the following information in its annual report:
 $\begin{array}{|l|r|r|r}
\hline & \mathbf{2 0 1 1} & \mathbf{2 0 1 0} & {\mathbf{2 0 0 9}} \
\hline \text { Sales } & \$ 178,400 & \$ 162,500 & \$ 155,500 \
\hline \text { Cost of goods sold } & 115,000 & 102,500 & 100,000 \
\hline \text { Operating expenses } & 50,000 & 50,000 & 45,000 \
\hline \text { Net income } & 13,400 & 10,000 & 10,500 \
\hline
\end{array}$
-Refer to the information for Ramos Company.In a percentage change income statement over the period of 2009 to 2011,what is the change in net income?

Accepted Answer

($13,400 - 10,500)/ $10,500 = 27.6%

Question 4

Carl Industries
Carl Industries has condensed balance sheets as shown:
 
-Refer to the information for Carl Industries.In a percentage change balance sheet over the period of 2009 to 2011,what is the change in long-term liabilities?

Accepted Answer

($ ($420,000-400000)/$400,000=5%

Question 5

Firms with complex capital structures can use which of the following in calculating EPS

Accepted Answer

Firms with complex capital structures can use all of the above in calculating EPS. Outstanding convertible bonds, stock options exercised, and stock warrants issued can all potentially dilute the number of outstanding shares of the company, which can impact the calculation of EPS. Therefore, it is important to include all of these factors when calculating EPS for firms with complex capital structures.

Question 6

The three elements of risk that help in understanding differences across firms and changes over time in ROAs are:

Accepted Answer

The answer of The three elements of risk that help...

Question 7

Carl Industries
Carl Industries has condensed balance sheets as shown:
 
-Refer to the information for Carl Industries.In a common size balance sheet for 2009,total liabilities and equity are expressed as

Accepted Answer

In a common size balance sheet, all items are expressed as a percentage of total assets. Therefore, total liabilities and equity would be expressed as 100%, since they represent the entirety of the company's financing sources.

Question 8

When the financial analysts multiplies the profit margin for ROA with the assets turnover ratio the result is called______________

Accepted Answer

The answer of When the financial analysts multiplies the profit...

Question 9

Which of the following are better indicated by percentage change statements than common-size statements?

Accepted Answer

Percentage change statements are better indicated for growth and decline because they compare the change in a specific variable between two periods of time, making it easier to see if the variable has increased or decreased. Common-size statements, on the other hand, express all items as a percentage of a common base, which is useful for comparing the composition of different financial statements or companies, but not as helpful for tracking changes in a variable over time.

Question 10

Firms with ____________________ levels of operating leverage experience greater variability in their return on assets.

Accepted Answer

The answer of Firms with ____________________ levels of operating leverage...

Question 11

Carl Industries
Carl Industries has condensed balance sheets as shown:
 
-Refer to the information for Carl Industries.In a common size balance sheet for 2010,plant and equipment (net)is expressed as

Accepted Answer

$420,000/503,000 83.50%

Question 12

Another term for earnings power is

Accepted Answer

Earnings power refers to the ability of a company to generate sustained profits over time. Therefore, sustainable earnings is the best choice for another term for earnings power.

Question 13

Carl Industries
Carl Industries has condensed balance sheets as shown:
 
-Refer to the information for Carl Industries.In a percentage change balance sheet over the period of 2009 to 2011,what is the change in current assets?

Accepted Answer

($65,000-80,000)/80,000=(18.75%)

Question 14

The ____________________ effect of interest expense on net income equals one minus the marginal tax rate times the interest expense.

Accepted Answer

The answer of The ____________________ effect of interest expense on...

Question 15

Return on assets will likely differ across firms and across time.Three elements of risk that will help explain these differences are ________________________________________,cyclicality of sales and stage and length of product life cycle.

Accepted Answer

The answer of Return on assets will likely differ across...

Question 16

Return on assets will likely differ across firms and across time.Three elements of risk that will help explain these differences are operating leverage,___________________________________,and stage and length of product life cycle.

Accepted Answer

The answer of Return on assets will likely differ across...

Question 17

Return on common equity can be disaggregated into profit margin for ROCE,capital structure leverage and _________________________________________________.

Accepted Answer

The answer of Return on common equity can be disaggregated...

Question 18

Return on assets can be disaggregated into asset turnover and ____________________________________________________________.

Accepted Answer

The answer of Return on assets can be disaggregated into...

Question 19

Common-size analysis requires the analyst to be aware that percentages can change because of all of the following except:

Accepted Answer

The answer of Common-size analysis requires the analyst to be...

Question 20

Firms with high operating leverage have a higher proportion of _________________________ in their cost structure.

Accepted Answer

The answer of Firms with high operating leverage have a...

Quiz 4: Profitability Analysis

The computation of the additional shares to be issued on the exercise of stock options assumes that the firm would repurchase common shares on the open market using an Amount equal to the sum of all the following except: