Chapter 4 Analysis of Financial Statements 113Total
Current
AssetsCurrent
RatioEffect
on Net
Income
h. A cash dividend is declared and paid. _____ _____ _____
i. Cash is obtained through short-term bank loans. _____ _____ _____
j. Short-term notes receivable are sold at a discount. _____ _____ _____
k. Marketable securities are sold below cost. _____ _____ _____
l. Advances are made to employees. _____ _____ _____
m. Current operating expenses are paid. _____ _____ _____
n. Short-term promissory notes are issued to trade
creditors in exchange for past due accounts payable. _____ _____ _____
o. 10-year notes are issued to pay off accounts payable. _____ _____ _____
p. A fully depreciated asset is retired. _____ _____ _____
q. Accounts receivable are collected. _____ _____ _____
r. Equipment is purchased with short-term notes. _____ _____ _____
s. Merchandise is purchased on credit. _____ _____ _____
t. The estimated taxes payable are increased. _____ _____ _____DAYS SALES OUTSTANDING Baker Brothers has a DSO of 40 days, and its annual sales
are $7,300,000. What is its accounts receivable balance? Assume that it uses a 365-day year.
DEBT RATIO Bartley Barstools has an equity multiplier of 2.4, and its assets are financed
with some combination of long-term debt and common equity. What is its debt ratio?
DUPONT ANALYSIS Doublewide Dealers has an ROA of 10%, a 2% profit margin, and an
ROE of 15%. What is its total assets turnover? What is its equity multiplier?
MARKET/BOOK RATIO Jaster Jets has $10 billion in total assets. Its balance sheet shows $1
billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity.
It has 800 million shares of common stock outstanding, and its stock price is $32 per share.
What is Jaster’s market/book ratio?
PRICE/EARNINGS RATIO A company has an EPS of $2.00, a cash flow per share of $3.00,
and a price/cash flow ratio of 8.0#. What is its P/E ratio?
DUPONT AND ROE A firm has a profit margin of 2% and an equity multiplier of 2.0. Its
sales are $100 million, and it has total assets of $50 million. What is its ROE?
DUPONT AND NET INCOME Ebersoll Mining has $6 million in sales, its ROE is 12%, and its
total assets turnover is 3.2#. The company is 50% equity financed. What is its net income?
BASIC EARNING POWER Duval Manufacturing recently reported the following information:
Net income $600,000
ROA 8%
Interest expense $225,000
Duval’s tax rate is 35%. What is its basic earning power (BEP)?
M/B AND SHARE PRICE You are given the following information: Stockholders’ equity!
$3.75 billion, price/earnings ratio! 3.5, common shares outstanding! 50 million, and
market/book ratio! 1.9. Calculate the price of a share of the company’s common stock.
RATIO CALCULATIONS Assume the following relationships for the Brauer Corp.:Sales/total assets 1.5#
Return on assets (ROA) 3%
Return on equity (ROE) 5%
Calculate Brauer’s profit margin and debt ratio.
RATIO CALCULATIONS Graser Trucking has $12 billion in assets, and its tax rate is 40%.
Its basic earning power (BEP) ratio is 15%, and its return on assets (ROA) is 5%. What is its
times-interest-earned (TIE) ratio?PROBLEMPROBLEMSS
Easy
Problems 1–6
Easy
Problems 1–6
4-14-1
4-24-2
4-34-3
4-44-4
4-54-5
4-64-6
Intermediate
Problems 7–18
Intermediate
Problems 7–18