Question 1

Suppose you calculated the following ratio for a firm:
 The sum of the compensation paid to the owners,directors,and managers,divided by total sales.Which class of financial ratios should this be included in and why?
 Who might be interested in such a ratio?

Accepted Answer

The answer of Suppose you calculated the following ratio for...

Question 2

Robert Morris Associates publishes peer group financial information for a host of industries,yet the numbers typically only appear in common-size form.Why not report average dollar amounts instead?

Accepted Answer

The answer of Robert Morris Associates publishes peer group financial...

Question 3

What is the times interest earned ratio for 2010?

Accepted Answer

The answer of What is the times interest earned ratio...

Question 4

Katelyn's Kites has net income of $240 and total equity of $2,000.The debt-equity ratio is 1.0 and the plowback ratio is 40%.What is the internal growth rate?

Accepted Answer

The answer of Katelyn's Kites has net income of $240...

Question 5

What is the equity multiplier for 2010?

Accepted Answer

The equity multiplier is calculated as Total Assets/Total Equity. For 2010, Total Assets are $800,000 and Total Equity is $200,000. Therefore, the equity multiplier is 800,000/200,000 = 4. This is the same as 1 + Debt/Equity Ratio. Since the Debt/Equity Ratio for 2010 is 1.36, the equity multiplier is 1 + 1.36 = 2.36. Therefore, the answer is B.

Question 6

Suppose a firm calculates its external funding needs and finds that it is negative.What are the firm's options in this case?

Accepted Answer

The answer of Suppose a firm calculates its external funding...

Question 7

Why is it important for managers to understand the importance of both the internal and the sustainable rates of growth?

Accepted Answer

The answer of Why is it important for managers to...

Question 8

List and interpret two liquidity ratios.
Choose any two of the following:

Accepted Answer

The answer of List and interpret two liquidity ratios.
Choose any...

Question 9

Which is a more meaningful measure of profitability for a firm,return on assets or return on equity?
 Why?

Accepted Answer

The answer of Which is a more meaningful measure of...

Question 10

The Green Giant has a 5% profit margin and a 40% dividend payout ratio.The total asset turnover is 1.40 and the equity multiplier is 1.50.What is the sustainable rate of growth?

Accepted Answer

The answer of The Green Giant has a 5% profit...

Question 11

Neal's Nails has an 11% return on assets and a 30% dividend payout ratio.What is the internal growth rate?

Accepted Answer

The answer of Neal's Nails has an 11% return on...

Question 12

A firm has days' sales in inventory of 105 days,an average collection period of 35 days,and takes 42 days,on average,to pay its accounts payable.Taken together,what do these three figures imply about the firm's operations and its cash flows?

Accepted Answer

The answer of A firm has days' sales in inventory...

Question 13

What is the return on equity for 2010?

Accepted Answer

Return on equity = Net income / Shareholder's equity = 1,000 / 6,167 = 16.2%

Question 14

What is the debt-equity ratio for 2010?

Accepted Answer

The answer of What is the debt-equity ratio for 2010?
...

Question 15

It is often said that anyone with a pencil can calculate financial ratios,but it takes a brain to interpret them.What kinds of things should an analyst keep in mind when evaluating the financial statements of a given firm?

Accepted Answer

The answer of It is often said that anyone with...

Question 16

State the assumptions that underlie the sustainable growth rate and interpret what the sustainable growth rate means.

Accepted Answer

The answer of State the assumptions that underlie the sustainable...

Quiz 3: Financial Statements Analysis and Long-Term Planning

Suppose you calculated the following ratio for a firm: The sum of the compensation paid to the owners,directors,and managers,divided by total sales.Which class of financial ratios should this be included in and why? Who might be interested in such a ratio?