Assignment
1. To create a common size balance sheet, we divide each of the asset, liability, and equity account items by
total debt.
cost of goods sold.
sales.
total assets.
2. Sawaya Company had depreciation and amortization expenses of $522,311, interest expenses of $114,077, and an EBITDA of $1,521,087 for the year ended June 30, 2010. What is the Times Interest Earned for this company?
.6 times
8.8 times
13.3 times
None of these
3. Which one of the following statements is NOT true?
The accounts receivables turnover ratio measures how quickly the firm collects on its credit sales.
DSO measures in days, the time the firm takes to convert its receivables into cash.
One ratio that measures the efficiency of a firm's collection policy is days' sales outstanding.
The more days that it takes the firm to collect on its receivables, the more efficient the firm is.
4. Which one of the following is a criticism of equating the goals of maximizing the ROE of a firm and maximizing the firm's shareholder wealth?
ROE is based on after-tax earnings, not cash flows.
ROE does not consider risk.
ROE ignores the size of the initial investment as well as future cash flows.
All of these are criticisms of ROE as a goal.
5. Efficiency ratio: Jet, Inc., has net sales of $712,478 and accounts receivables of $167,435. What are the firm's accounts receivables turnover and days's sales outstanding?
0.24 times; 78.5 days
None of these
4.26 times; 85.7 days
5.2 times; 61.3 days
6. The following are the financial statements for Nederland Consumer Products Company for the fiscal year ended September 30, 2011.=
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Nederland Consumer Products Company
Income Statement for the Fiscal Year
Ended September 30, 2011
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Net sales
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63,291
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Cost of goods sold
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30,612
|
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Gross margin
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32,679
|
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Marketing, research, administrative exp.
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14,139
|
|
Depreciation
|
939
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|
Operating income(loss)
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17,601
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|
Interest expense
|
483
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Earnings(loss) before income taxes
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17,118
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Income taxes
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5,280
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Net earnings(loss)
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11,838
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Nederland Consumer Products Company
Balance Sheet as of September 30, 2011
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Assets:
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Liabilities and Stockholder's Equity:
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Cash and marketable securities
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4,517
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Accounts payable
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3,547
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Investment securities
|
440
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Accrued and other liabilities
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9,422
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|
Accounts receivable
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4,256
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Taxes payable
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2,228
|
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Total inventories
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5,388
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Debt due within one year
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6,366
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Deferred income taxes
|
790
|
|
|
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Prepaid expenses & other receivables
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1,566
|
|
|
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Total current assets
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16,957
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Total current liabilities
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21,563
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|
Property, plant, and equip., at cost
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30,314
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Long-term debt
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12,314
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|
Less: Accumulated depreciation
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8,505
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Deferred income taxes
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1,831
|
|
Net plant and equipment
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21,809
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Other non-current liabilities
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3,445
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|
Net goodwill & other intangible assets
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28,458
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Total liabilities
|
39,153
|
|
Other non-current assets
|
2,239
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Convertible Class A preferred stock
|
1,343
|
|
|
Common stock
|
1,997
|
|
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Retained earnings
|
26,970
|
|
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Total stockholders' equity (deficit)
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30,310
|
|
Total assets
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69,463
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Total liabilities and stockholders' equity
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69,463
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Calculate all the ratios, for which industry figures are available below, for Nederland and compare the firm's ratios with the industry ratios. (Round current ratio, quick ratio, debt ratio, long term debt ratio answers to 2 decimal places, e.g. 12.25 and other answers to 1 decimal place, e.g.12.5 or 12.5%.)
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Current Ratio
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times
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Quick Ratio
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times
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Gross margin
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%
|
|
Net profit margin
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%
|
|
Debt ratio
|
times
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Long-term debt to equity
|
times
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|
Interest coverage
|
|
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ROA
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%
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|
ROE
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%
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