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FIN 3715 Chapter : Chap003 TB High

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azuremammoth471
15 Mar 2019
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LSU
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Finance
Course
FIN 3715
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All

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A common-size income statement is an accounting statement that expresses all of a firm"s expenses as percentage of: sales. A firm currently has in debt for every ,000 in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which one of the following will decrease as a result of this action: equity multiplier. A firm has an interval measure of 48. This means that the firm has sufficient liquid assets to do which one of the following: cover its operating costs for the next 48 days. A firm uses 2008 as the base year for its financial statements. The common-size, base- year statement for 2009 has an inventory value of 1. 08. This is interpreted to mean that the 2009 inventory is equal to 108 percent of which one of the following: 2008 inventory expressed as a percent of 2008 total assets.

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Related Questions

Quixote Industries currently has $6 million in debt for every $10 million in equity. Assume the firm uses some of its cash to decrease its debt while maintaining its current equity and net income. Which of the following will not change as a result of this action? -equity multiplier and return on assets -total asset turnover and return on equity -return on assets and total asset turnover -profit margin and return on equity -equity multiplier and profit margin

21. Bellow are the 2007 and 2008 year-end balance sheets for TranEnterprises. The firm has never paid a dividend on its commonstock, and it issues $2,400,000 of 10-year, non-callable, long termdebt in 2007. As of the end of 2008, none of the principal on thisdebit has been repaid. Assume that the company’s sales in 2007 and2008 were the same. Which of the following statements must becorrect?
Assets 2008 2007
Cash 200,000 170,000
Accounts receivable 864,000 700,000
Inventories 2,000,000 1,400,000
Total Current Assets 3,064,000 2,270,000
Net Fixed Assets 6,000,000 5,600,000
Total Assets 9,064,000 7,870,000
Liabilities and equity
Accounts Payable 1,400,000 1,090,000
Notes Payable 1,600,000 1,800,000
Total Current Liabilities 3,000,000 2,890,000
Long Term Debit 2,400,000 2,400,000
Common Stock 3,000,000 2,000,000
Retained Earnings 664,000 580,000
Total Common Equity 3,664,000 2,580,000
Total liabilities and Equity 9,064,000 7,870,000
a) The firm increased its short-term bank debit in 2008
b) The firm issues long term debit in 2008
c) The firm issued new common stock in 2008
d) The firm repurchased some common stock in 2008
e) The firm had negative net income in 2008
Financial Ratios Competitive Comparison
Liquidity (Balance Sheet) Calculations Starbucks Yum!
2010 2009 2008 2010 2010
Current Ratio 1.49 1.14 1.39 1.55 0.94
Quick or Acid Test 1.22 0.96 1.18 0.98 0.69
Inventory to net working capital 0.08 0.25 0.11 0.56 -1.4
Activity (Balance Sheet)
2010 2009 2008
Inventory turnover 219.06 214.17 210.96 8.21 42.96
Fixed asset turnover 1.09 1.06 1.16 4.43 2.96
Total Asset Turnover 0.75 0.75 0.83 1.68 1.36
Leverage (Balance Sheet)
2010 2009 2008
Debt to Assets Ratio 0.36 0.35 0.36 0.08 0.35
Long-term debt to equity ratio 0.79 0.75 0.76 0.15 2.28
Debt to equity 1.18 1.15 1.13 0.74 3.98
Times-interest earned ratio 16.53 14.71 12.78 44.94 9.17
Profitability (Income Statement)
2010 2009 2008
Gross profit Margin 0.40 0.39 0.37 0.58 0.16
Operating profit margin 0.31 0.31 0.28 0.13 0.15
Net Profit margin 0.21 0.20 0.18 0.08 0.1
Return on total assets 0.15 0.15 0.15 0.15 0.14
Return on equity 0.34 0.32 0.32 0.26 0.73

Using the above McDonalds financial information, prepare a common size income statement where all data is expressed as a percentage of revenues. Be sure to discuss the year-by-year trends that are significant, the overall financial situation of the organization, any areas of company operations that might need immediate management attention, and any areas that seem particularly strong.