Quiz on Working with Financial Statements
Finance
FIN3113—Chapter 3 Working with Financial Statements 1. BC Corporation has 1,800,000 shares outstanding & earned $2,700,000 last year on assets of $20 million & equity of $15 million. What is the PE ratio for BC if the stock is currently selling at $18 per share? • 12 • EPS=$2,700,000/1,800,000=1.5 & PE is price per earnings (18/1.5)=12 2. Which of the following are traditional financial ratio categories? • Profitability ratios, financial leverage ratios, turnover ratios 3. AD Corporation has earnings per share of $3 & it’s stock is currently selling at $30 per share. What is the PE ratio for AD? • 10, PE is price per earning (30/3=30) 4. BC Corporation has a return on equity of 20% on total equity of $1,200,000. BC generated $2.5 million in sales on $3 million in assets. A DuPoint decomposition of ROE shows the 20% return on equity is from a 9.6% profit margin, a .83 total asset turnover, and a 2.50 equity multiplier. • Net income=1,200,000*0.20=$240,000; profit margin= $240,000/2,500,000=0.096 or 9.6% • Total asset turnover=$2.5 million/3 million= 0.83 • Equity multiplier= 3 million/1.2 million= 2.5 5. The inventory turnover ratios for Proctor & Gamble over the past three years are 5.09, 5.72, & 5.92 times. Explaining the upward trend in inventory turnover ratio requires: • Further investigation 6. Which of the following are sources of cash? • An increase in notes payable, a decrease in accounts receivable 7. Place items in order they are placed from top to bottom on the Liabilities & Equity side of the balance sheet • Accounts Payable, Notes Payable, Long-term Debt, Owners Equity 8. Whenever market information is available, it should be used instead of accounting data 9. AD Corporation has net income of $403,000 on operating earnings of $600,000 & total assets of $3,358,333. The firm’s return on assets is 12.00. • ROA= 403,000/3,358,333= 12% 10. Which of the
FIN3113—Chapter 3 Working with Financial Statements 1. BC Corporation has 1,800,000 shares outstanding & earned $2,700,000 last year on assets of $20 million & equity of $15 million. What is the PE ratio for BC if the stock is currently selling at $18 per share? • 12 • EPS=$2,700,000/1,800,000=1.5 & PE is price per earnings (18/1.5)=12 2. Which of the following are traditional financial ratio categories? • Profitability ratios, financial leverage ratios, turnover ratios 3. AD Corporation has earnings per share of $3 & it’s stock is currently selling at $30 per share. What is the PE ratio for AD? • 10, PE is price per earning (30/3=30) 4. BC Corporation has a return on equity of 20% on total equity of $1,200,000. BC generated $2.5 million in sales on $3 million in assets. A DuPoint decomposition of ROE shows the 20% return on equity is from a 9.6% profit margin, a .83 total asset turnover, and a 2.50 equity multiplier. • Net income=1,200,000*0.20=$240,000; profit margin= $240,000/2,500,000=0.096 or 9.6% • Total asset turnover=$2.5 million/3 million= 0.83 • Equity multiplier= 3 million/1.2 million= 2.5 5. The inventory turnover ratios for Proctor & Gamble over the past three years are 5.09, 5.72, & 5.92 times. Explaining the upward trend in inventory turnover ratio requires: • Further investigation 6. Which of the following are sources of cash? • An increase in notes payable, a decrease in accounts receivable 7. Place items in order they are placed from top to bottom on the Liabilities & Equity side of the balance sheet • Accounts Payable, Notes Payable, Long-term Debt, Owners Equity 8. Whenever market information is available, it should be used instead of accounting data 9. AD Corporation has net income of $403,000 on operating earnings of $600,000 & total assets of $3,358,333. The firm’s return on assets is 12.00. • ROA= 403,000/3,358,333= 12% 10. Which of the