Question 1

Ramos Company Ramos Company included the following information in its annual report:
 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

The answer of Ramos Company Ramos Company included the following...

Question 2

Firms with simple capital structures can have which of the following?

Accepted Answer

A firm with a simple capital structure does not have any potentially dilutive securities like convertible bonds, stock options, or stock warrants. Declared preferred stock dividends do not affect the simplicity of the capital structure.

Question 3

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 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 current assets?

Accepted Answer

The answer of Carl Industries Carl Industries has condensed balance...

Question 5

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

To create a common size balance sheet, we express each item as a percentage of total assets. 
For plant and equipment (net), we divide $61,000 by total assets of $73,500 to get 0.83, or 83%. Therefore, the correct answer is C) 83%.

Question 6

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 7

The numerator of the return on assets ratio is net income from operations excluding the effects of any ______________________________.

Accepted Answer

The answer of The numerator of the return on assets...

Question 8

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...

Question 9

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 10

Another term for earnings power is

Accepted Answer

Earnings power refers to the ability of a company to generate sustainable earnings over a long period of time. Therefore, sustainable earnings is the best term to describe earnings power. Option A and B refer to one-time or non-sustainable revenue or gains, and option D refers to the change in a company's equity, which may not accurately reflect its earnings power.

Question 11

Return on assets can be disaggregated into profit margin for return on assets and ______________________________.

Accepted Answer

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

Question 12

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 13

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

Accepted Answer

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

Question 14

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 provide a clear indication of the increase or decrease in an item or factor over time, whereas common-size statements only provide a relative size of each item or factor in relation to a base amount. Monetary changes, profitability, and stability can also be indicated by both percentage change and common-size statements.

Question 15

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 16

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 17

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 18

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

The answer of Carl Industries Carl Industries has condensed balance...

Question 19

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 computation of 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 cash proceeds from such exercise, unamortized compensation expense on those options, and any tax benefits that would be credited to additional paid-in capital. Net incremental shares issued would not be included in this calculation as they represent the actual increase in the number of outstanding shares due to the exercise of stock options, rather than the number of shares the firm would need to repurchase to offset this increase.

Question 20

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 the items are expressed as a percentage of total assets. Therefore, total liabilities and equity would also be expressed as a percentage of total assets, which would equal 100%.

Quiz 4: Profitability Analysis

Ramos Company Ramos Company included the following information in its annual report: 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?