FIN571 FIN571 WEEK 2 QUIZ (WILEYPLUS)

Which one of the following statements about trend analysis is NOT correct?

All of these are true statements.

This benchmark is based on a firm's historical performance

The Standard Industrial Classification (SIC) System is used to identify benchmark firms

It allows management to examine each ratio over time and determine whether the trend is good or bad for the firm.

Coverage ratios: Sectors, Inc., has an EBIT of $7,221,643 and interest expense of $611,800. Its depreciation for the year is $1,434,500. What is its cash coverage ratio?

None of these

15.42 times

18.34 times

14.15 times

Multiples analysis: Turner Corp. has debt of $230 million and generated a net income of $121 million in the last fiscal year. In attempting to determine the total value of the firm, an investor identified a similar firm in Jacobs, Inc., an all-equity firm. This firm had 150 million shares outstanding, a share price of $14.25, and net income of $182 million. What is the total value of Turner Corp.? Round to the nearest million dollars.

$1,421 million

$1,715 million

$1,651 million

$1,191 million

Coverage ratios, like times interest earned and cash coverage ratio, allow

a firm's creditors to assess how well the firm will meet its short-term liabilities other than interest expense.

a firm's management to assess how well they meet short-term liabilities

a firm's creditors to assess how well the firm will meet its interest obligations

a firm's shareholders to assess how well the firm will meet its short-term liabilities

Peer group analysis can be performed by

management choosing a set of firms that are similar in size or sales, or who compete in the same market.

using the average ratios of this peer group, which would then be used as the benchmark

identifying firms in the same industry that are grouped by size, sales, and product lines, in order to establish benchmark ratios.

Only a and b relate to peer group analysis

Efficiency ratio: If Viera, Inc., has an accounts receivable turnover of 3.9 times and net sales of $3,436,812, what is its level of receivables?

$81,234

$881,234

$1,340,357

$13,403,567