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1. Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%.

Balance Sheet
	2011	2010
Assets:
Cash	$10,000	$ 6,000
Accounts Receivable (net)	6,000	1,500
Inventory	8,000	10,000
Long-lived assets	12,000	11,000
Less: Accumulated depreciation	(4,000)	(2,000)
Total assets	$32,000	$26,500

Liabilities and Stockholders’ Equity:
Accounts payable	$ 5,000	$ 6,000
Deferred revenues	1,000	2,000
Long-term note payable	10,000	10,000
Less: Discount on note payable	(800)	(1,000)
Common stock	12,000	6,000
Retained earnings	4,800	3,500
Total liabilities and stockholders’ equity	$32,000	$26,500

2. Income Statement For the year ended December 31, 2011

Revenues	$42,000
Cost of goods sold	(24,000)
Depreciation expense	(2,000)
Interest expense	(3,000)
Bad debt expense	(2,000)
Other expense (including income taxes)	(9,000)
Net income	$ 2,000

3. Refer to the information for Orca Industries. The return on common shareholders’ equity for Orca Industries is

	a.	10%
	b.	13.5%
	c.	11.9%
	d.	15.2%

1.2 points

Question 2

1. Adjustments for dilutive securities and the adjustment to weighted average number of shares outstanding presumes that the dilutive securities are converted to common shares

	a.	as of the end of the year.
	b.	as of the beginning of the year.
	c.	as of the middle of the year.
	d.	as of the point in time where the maximum number of shares are outstanding.

1.2 points

Question 3

1. Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%.

Balance Sheet
	2011	2010
Assets:
Cash	$10,000	$ 6,000
Accounts Receivable (net)	6,000	1,500
Inventory	8,000	10,000
Long-lived assets	12,000	11,000
Less: Accumulated depreciation	(4,000)	(2,000)
Total assets	$32,000	$26,500

Liabilities and Stockholders’ Equity:
Accounts payable	$ 5,000	$ 6,000
Deferred revenues	1,000	2,000
Long-term note payable	10,000	10,000
Less: Discount on note payable	(800)	(1,000)
Common stock	12,000	6,000
Retained earnings	4,800	3,500
Total liabilities and stockholders’ equity	$32,000	$26,500

2. Income Statement For the year ended December 31, 2011

Revenues	$42,000
Cost of goods sold	(24,000)
Depreciation expense	(2,000)
Interest expense	(3,000)
Bad debt expense	(2,000)
Other expense (including income taxes)	(9,000)
Net income	$ 2,000

3. Refer to the information for Orca Industries. Orca’s accounts receivable turnover is (assume that Orca makes all sales on account)

	a.	10
	b.	7.0
	c.	11.2
	d.	.53

1.2 points

Question 4

1. Mobile Company Mobile Company manufactures computer technology devices. Selected financial data for Mobile is presented below, use the information to answer the following questions:


Current Assets	As of Dec. 31, 2010	Dec. 31, 2009
Cash and short-term investments	$1,267,038	$ 616,604
Accounts Receivable (net)	490,816	665,828
Inventories	338,599	487,505
Prepaid Expenses and other current assets	292,511	291,915
Total Current Assets	$2,388,964	$2,061,852

Current Liabilities
Short-term borrowings	$ 25,190	$ 38,108
Current portion of long-term debt	182,295	210,090
Accounts payable	296,307	334,247
Accrued liabilities	941,912	743,999
Income taxes payable	203,049	239,793
Total Current Liabilities	1,648,753	1,566,237

Selected Income Statement Data - for the year ending December 31, 2010:
Net Sales	$4,885,340
Cost of Goods Sold	2,542,353
Operating Income	733,541
Net Income	230,101

Selected Statement of Cash Flow Data - for the year ending December 31, 2010:
Cash Flows from Operations	$1,156,084

4. Refer to the information for Mobile Company. Mobile's quick ratio changed by what percentage from 2009 to 2010?

	a.	82%
	b.	107%
	c.	25%
	d.	30%

1.2 points

Question 5

1. Mobile Company Mobile Company manufactures computer technology devices. Selected financial data for Mobile is presented below, use the information to answer the following questions:


Current Assets	As of Dec. 31, 2010	Dec. 31, 2009
Cash and short-term investments	$1,267,038	$ 616,604
Accounts Receivable (net)	490,816	665,828
Inventories	338,599	487,505
Prepaid Expenses and other current assets	292,511	291,915
Total Current Assets	$2,388,964	$2,061,852

Current Liabilities
Short-term borrowings	$ 25,190	$ 38,108
Current portion of long-term debt	182,295	210,090
Accounts payable	296,307	334,247
Accrued liabilities	941,912	743,999
Income taxes payable	203,049	239,793
Total Current Liabilities	1,648,753	1,566,237

Selected Income Statement Data - for the year ending December 31, 2010:
Net Sales	$4,885,340
Cost of Goods Sold	2,542,353
Operating Income	733,541
Net Income	230,101

Selected Statement of Cash Flow Data - for the year ending December 31, 2010:
Cash Flows from Operations	$1,156,084

4. Refer to the information for Mobile Company. Mobile's days accounts payable outstanding at the end of 2010 is

	a.	45.51 days
	b.	50 days
	c.	7.53 days
	d.	48.09 days

1.2 points

Question 6

1. Ramos Company Ramos Company included the following information in its annual report:

	2011	2010	2009
Sales	$178,400	$162,500	$155,500
Cost of goods sold	115,000	102,500	100,000
Operating expenses	50,000	50,000	45,000
Net income	13,400	10,000	10,500

2. Refer to the information for Ramos Company. In a common size income statement for 2009, the cost of goods sold are expressed as:

	a.	64.3%
	b.	40.0%
	c.	103%
	d.	87 %

1.2 points

Question 7

1. Multiples of EPS to value firms are referred to as.

	a.	ROCE
	b.	price-earnings ratios
	c.	Weighted average number of common shares outstanding
	d.	ROA

1.2 points

Question 8

1. Extreme Sports Company and All Sports Corporation Below is financial information for two sporting goods retailers. Extreme Sports Company operates a retail business and franchising business. At the end 2011, Extreme Sports had 263 Company-owned and 120 franchise-operated retail stores. Extreme’s stores are located in suburban, strip mall and regional mall locations, the company operates in 32 states. All Sports Corporation sells sporting goods and related products at over 2,500 Company-operated retail stores. Selected Data for All Sports and Extreme Sports (amounts in millions)

	All Sports	Extreme Sports
Sales	$5,320	$1,344
Cost of Goods Sold	3,897	887
Interest Expense	138	43
Net Income	212	33
Average Inventory	998	286
Average Fixed Assets	1,163	130
Average Total Assets	2,472	662
Average Tax Rate	40%	40%

2. Refer to the information for Extreme Sports Company and All Sports Corporation. What is the return on assets for All Sports?

	a.	9.2%
	b.	8.6%
	c.	11.9%
	d.	10.8%

1.2 points

Question 9

1. Here are several ratios calculated from Midas Company's financial statements: Days in Receivables = 43 Days in Payables = 38 Days in Inventory = 31 How many days of working capital financing does Midas need to obtain from other sources?

	a.	36 days
	b.	56 days
	c.	26 days
	d.	112 days

1.2 points

Question 10

1. Mobile Company Mobile Company manufactures computer technology devices. Selected financial data for Mobile is presented below, use the information to answer the following questions:


Current Assets	As of Dec. 31, 2010	Dec. 31, 2009
Cash and short-term investments	$1,267,038	$ 616,604
Accounts Receivable (net)	490,816	665,828
Inventories	338,599	487,505
Prepaid Expenses and other current assets	292,511	291,915
Total Current Assets	$2,388,964	$2,061,852

Current Liabilities
Short-term borrowings	$ 25,190	$ 38,108
Current portion of long-term debt	182,295	210,090
Accounts payable	296,307	334,247
Accrued liabilities	941,912	743,999
Income taxes payable	203,049	239,793
Total Current Liabilities	1,648,753	1,566,237

Selected Income Statement Data - for the year ending December 31, 2010:
Net Sales	$4,885,340
Cost of Goods Sold	2,542,353
Operating Income	733,541
Net Income	230,101

Selected Statement of Cash Flow Data - for the year ending December 31, 2010:
Cash Flows from Operations	$1,156,084

4. Refer to the information for Mobile Company. Mobile's days receivables outstanding at the end of 2010 was

	a.	45.25 days
	b.	8.50 days
	c.	43.20 days
	d.	40.50 days

1.2 points

Question 11

1. Below is selected information from Marker’s 2012 financial statements:

	As of Dec. 31, 2012	Dec. 31, 2011
Cash and short-term investments	$ 958,245	$ 745,800
Accounts Receivable (net)	125,850	135,400
Inventories	195,650	175,840
Prepaid Expenses and other current assets	45,300	30,860
Total Current Assets	$1,325,045	$1,087,900
Plant, Property and Equipment, net	1,478,320	1,358,700
Intangible Assets	125,600	120,400
Total Assets	$2,928,965	$2,567,000


Short-term borrowings	$ 25,190	$ 38,108
Current portion of long-term debt	45,000	40,000
Accounts payable	285,400	325,900
Accrued liabilities	916,722	705,891
Income taxes payable	125,400	115,600
Total Current Liabilities	$1,397,712	$1,225,499
Long-term Debt	450,000	430,000
Total Liabilities	$1,847,712	$1,655,499
Shareholders' Equity	$1,081,253	$ 911,501
Total Liabilities and Shareholders' Equity	$2,928,965	$2,567,000

Selected Income Statement Data - for the year ending December 31, 2012:
Net Sales	$3,210,645
Cost of Goods Sold	(2,310,210)
Operating Income	$ 900,435
Net Income	$ 324,850

Selected Statement of Cash Flow Data - for the year ending December 31, 2012:
Cash Flows from Operations	$584,750
Interest Expense	42,400
Income Tax Expense	114,200

2. Marker’s Liabilities to Assets Ratio for 2012 is

	a.	63.1%
	b.	78.3%
	c.	105.1%
	d.	100.0%

1.2 points

Question 12

1. The best indicator for assessing a firm's long-term solvency risk is its ability to generate what over a period of years?

	a.	Positive cash flows
	b.	Income from continuing operations
	c.	Sales
	d.	Earnings

1.2 points

Question 13

1. Which of the following might an analyst not want to eliminate from past earnings when using past earnings to forecast future earnings?

	a.	revenue from the sale of inventory.
	b.	nonrecurring restructuring charges.
	c.	nonrecurring gains from the sale of assets.
	d.	unusual asset impairment charges.

1.2 points

Question 14

1. Net Devices Inc. The following balance sheets and income statements are for Net Devices Inc., a manufacturer of small electronic devices, including calculators, personal digital assistants and mp3 players. For purposes of these questions assume that the company has an effective tax rate of 35%. BALANCE SHEETS

ASSETS ($ in thousands)

Fiscal year end	2011	2010	2009
Cash	$ 875,650	$ 571,250	$ 154,230
Marketable securities	6,560	0	0
Receivables	771,580	775,250	902,000
Inventories	1,320,150	1,254,600	1,418,500
Other current assets	249,000	231,200	229,900
Total current assets	3,222,940	2,832,300	2,704,630

Property, plant & equipment	1,118,750	1,100,300	1,122,400

Intangibles	263,050	241,000	215,600
Deposits & other assets	184,500	168,250	168,900
Total assets	$4,789,240	$4,341,850	$4,211,530

LIABILITIES ($ in thousands)

Fiscal year end	2011	2010	2009
Accounts payable	$1,178,540	$1,061,100	$1,138,250
Current long term debt	18,100	316,500	150,900
Accrued expenses	664,100	615,900	585,400
Income taxes payable	138,900	108,400	38,200
Other current liabilities	0	0	0
Total current liabilities	1,999,640	2,101,900	1,912,750

Long term debt	478,250	378,400	599,630
Other long term liabilities	13,350	0	0
Total liabilities	2,491,240	2,480,300	2,512,380

Preferred stock	850,000	850,000	550,000
Common stock net	4,000	3,950	3,800
Additional Paid-in Capital	869,000	758,000	689,500
Retained earnings	1,430,500	1,055,000	1,245,050
Treasury stock	(855,500)	(805,400)	(789,200)
Shareholders' equity	2,298,000	1,861,550	1,699,150

Total Liab. & Equity	$4,789,240	$4,341,850	$4,211,530

INCOME STATEMENTS ($ in thousands)

Fiscal year end	2011	2010
Net sales	$11,455,500	$11,082,100
Cost of Goods Sold	(8,026,450)	(7,940,065)
Gross profit	3,429,050	3,142,035

Selling, general & admin. Exp.	(1,836,400)	(1,789,200)
Income before deprec. & amort.	1,592,650	1,352,835

Depreciation & amortization	(785,250)	(757,250)
Interest expense	(46,195)	(43,340)

Income before tax	761,205	552,245
Provision for income taxes	(157,725)	(112,290)
Minority interest	--	--

Net income	$ 603,480	$ 439,955

Outstanding shares (in thousands)	308,515	303,095
Preferred Dividends (in thousands)	$85,000	$85,000

4. Refer to the information for Net Devices Inc. What is Net Devices’ capital structure leverage ratio for 2011?

	a.	10.32
	b.	3.71
	c.	3.89
	d.	1.68

1.2 points

Question 15

1. Non-U.S. companies that list securities in the United States typically include a risk factors item in the:

	a.	disaggregated ROCE
	b.	Form 20-F
	c.	MD&A
	d.	10-K

1.2 points

Question 16

1. Economic theory teaches that differences in market returns must relate to differences in

	a.	book value
	b.	perceived risk
	c.	price-earnings ratio
	d.	bankruptcy risk

1.2 points

Question 17

1. To calculate diluted EPS, the accountant does all of the following except:

	a.	enters only the net incremental shares issued (shares issued under options minus assumed shares repurchased) in the computation of diluted EPS.
	b.	adds back any interest expense (net of taxes) on convertible bonds
	c.	adds back to net income any compensation expense recognized on the employee stock options
	d.	adds back any dividends on convertible preferred stock the firm subtracted in computing net income to common shareholders.

1.2 points

Question 18

1. The computation of the additional shares to be issued on the exercise of stock options assumes that the firm would repurchase common shares on the open market using an amount equal to the sum of all the following except:

	a.	any cash proceeds from such exercise
	b.	any tax benefits that would be credited to additional paid-in capital
	c.	net incremental shares issued
	d.	any unamortized compensation expense on those options

1.2 points

Question 19

1. Critics of EPS as a measure of profitability point out that it does not consider:

	a.	the deduction of preferred stock dividends from net income.
	b.	simple capital structures.
	c.	Adjustments for dilutive securities and the adjustment to weighted average number of shares outstanding for complex capital structures.
	d.	the amount of assets or capital required to generate a particular level of earnings.

1.2 points

Question 20

1. Which of the following is not a way a company can achieve a low-cost position

	a.	outsourcing
	b.	economies of scale
	c.	production efficiency
	d.	customer service

1.2 points

Question 21

1. Common-size analysis requires the analyst to be aware that percentages can change because of all of the following except:

	a.	changes in expenses in the numerator independent of changes in sales
	b.	changes in sales independent of changes in expenses
	c.	interaction effects between the numerator and denominator
	d.	All of these are possible explanations.

1.2 points

Question 22

1. All of the following are common international risks faced by companies except:

	a.	exchange rate changes
	b.	dependence on one or a few suppliers
	c.	asset expropriation
	d.	political unrest

1.2 points

Question 23

1. Mobile Company Mobile Company manufactures computer technology devices. Selected financial data for Mobile is presented below, use the information to answer the following questions:


Current Assets	As of Dec. 31, 2010	Dec. 31, 2009
Cash and short-term investments	$1,267,038	$ 616,604
Accounts Receivable (net)	490,816	665,828
Inventories	338,599	487,505
Prepaid Expenses and other current assets	292,511	291,915
Total Current Assets	$2,388,964	$2,061,852

Current Liabilities
Short-term borrowings	$ 25,190	$ 38,108
Current portion of long-term debt	182,295	210,090
Accounts payable	296,307	334,247
Accrued liabilities	941,912	743,999
Income taxes payable	203,049	239,793
Total Current Liabilities	1,648,753	1,566,237

Selected Income Statement Data - for the year ending December 31, 2010:
Net Sales	$4,885,340
Cost of Goods Sold	2,542,353
Operating Income	733,541
Net Income	230,101

Selected Statement of Cash Flow Data - for the year ending December 31, 2010:
Cash Flows from Operations	$1,156,084

4. Refer to the information for Mobile Company. Mobile's 2010 Inventory Turnover ratio is

	a.	7.46
	b.	11.83
	c.	5.62
	d.	6.16

1.2 points

Question 24

1. Below is selected information from Marker’s 2012 financial statements:

	As of Dec. 31, 2012	Dec. 31, 2011
Cash and short-term investments	$ 958,245	$ 745,800
Accounts Receivable (net)	125,850	135,400
Inventories	195,650	175,840
Prepaid Expenses and other current assets	45,300	30,860
Total Current Assets	$1,325,045	$1,087,900
Plant, Property and Equipment, net	1,478,320	1,358,700
Intangible Assets	125,600	120,400
Total Assets	$2,928,965	$2,567,000


Short-term borrowings	$ 25,190	$ 38,108
Current portion of long-term debt	45,000	40,000
Accounts payable	285,400	325,900
Accrued liabilities	916,722	705,891
Income taxes payable	125,400	115,600
Total Current Liabilities	$1,397,712	$1,225,499
Long-term Debt	450,000	430,000
Total Liabilities	$1,847,712	$1,655,499
Shareholders' Equity	$1,081,253	$ 911,501
Total Liabilities and Shareholders' Equity	$2,928,965	$2,567,000

Selected Income Statement Data - for the year ending December 31, 2012:
Net Sales	$3,210,645
Cost of Goods Sold	(2,310,210)
Operating Income	$ 900,435
Net Income	$ 324,850

Selected Statement of Cash Flow Data - for the year ending December 31, 2012:
Cash Flows from Operations	$584,750
Interest Expense	42,400
Income Tax Expense	114,200

2. Marker’s 2012 Interest Coverage ratio is

	a.	4.35
	b.	7.66
	c.	11.35
	d.	1.00

1.2 points

Question 25

1. Below is selected information from Marker’s 2012 financial statements:

	As of Dec. 31, 2012	Dec. 31, 2011
Cash and short-term investments	$ 958,245	$ 745,800
Accounts Receivable (net)	125,850	135,400
Inventories	195,650	175,840
Prepaid Expenses and other current assets	45,300	30,860
Total Current Assets	$1,325,045	$1,087,900
Plant, Property and Equipment, net	1,478,320	1,358,700
Intangible Assets	125,600	120,400
Total Assets	$2,928,965	$2,567,000


Short-term borrowings	$ 25,190	$ 38,108
Current portion of long-term debt	45,000	40,000
Accounts payable	285,400	325,900
Accrued liabilities	916,722	705,891
Income taxes payable	125,400	115,600
Total Current Liabilities	$1,397,712	$1,225,499
Long-term Debt	450,000	430,000
Total Liabilities	$1,847,712	$1,655,499
Shareholders' Equity	$1,081,253	$ 911,501
Total Liabilities and Shareholders' Equity	$2,928,965	$2,567,000

Selected Income Statement Data - for the year ending December 31, 2012:
Net Sales	$3,210,645
Cost of Goods Sold	(2,310,210)
Operating Income	$ 900,435
Net Income	$ 324,850

Selected Statement of Cash Flow Data - for the year ending December 31, 2012:
Cash Flows from Operations	$584,750
Interest Expense	42,400
Income Tax Expense	114,200

2. Marker’s 2012 Long-term Debt to Long-Term Capital ratio is

	a.	29.4%
	b.	25.4%
	c.	31.4%
	d.	34.0%