Questions

Strother Inc. has the following information for the previous year:  Net income = $400; Net operating profit after taxes (NOPAT) = $600; Total assets = $2,000; a  and Total net operating capital = $1800. The information for the current year is:  Net income = $900; Net operating profit after taxes (NOPAT) = $800; Total assets = $2,300; and Total net operating capital = $2200. What is the free cash flow for the current year?           

   a. $300 b. $400 c. $500 d. $600 e. $700

Which of the following statements is most correct?              

  a. Many large firms operate different divisions in different industries, and this makes it hard to develop a meaningful set of industry benchmarks for these types of firms. 

b. Financial ratios should be interpreted with caution because there exist seasonal and accounting differences that can reduce their comparability. 

c. Financial ratios should be interpreted with caution because it may be difficult to say with certainty what is a value. For example, in the case of the current ratio, a value is neither high nor low. 

d. Ratio analysis facilitates comparisons by standardizing numbers. 

e. All of the statements above are correct.