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· Question 1

1.2 out of 1.2 points

Correct

Carl Industries Carl Industries has condensed balance sheets as shown:

	2011	2010	2009
Assets:
Current assets	$55,000	$56,500	$70,000
Plant & equipment, net	495,000	410,000	440,000
Intangible assets, net	20,000	27,500	40,000
Total assets	$570,000	$494,000	$550,000

Liabilities & Stockholders’ Equity:
Current liabilities	$40,000	$35,000	$32,500
Long-term liabilities	395,000	310,000	375,000
Stockholders’ equity	135,000	149,000	142,500
Total liabilities & equity	$570,000	$494,000	$550,000

Refer to the information for Carl Industries. In a common size balance sheet for 2010, plant and equipment (net) is expressed as

Selected Answer:

83%

· Question 2

0 out of 1.2 points

Incorrect

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%

Refer to the information for Extreme Sports Company and All Sports Corporation. Compute the return on assets for Extreme Sports

Selected Answer:

5.0%

· Question 3

1.2 out of 1.2 points

Correct

Another term for earnings power is

Selected Answer:

sustainable earnings.

· Question 4

1.2 out of 1.2 points

Correct

Morrow Company currently has a current ratio of 1.1. The company decides to borrow $1,000,000 from First National Bank for a period of six months. After the borrowing Morrow’s current ratio will be

Selected Answer:

less than 1.1

· Question 5

0 out of 1.2 points

Incorrect

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

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

Selected Answer:

29.4%

· Question 6

1.2 out of 1.2 points

Correct

Which of the following scenarios is consistent with a increasing cost of goods sold to sales percentage and increasing inventory turnover

Selected Answer:

Firm shifts its product mix toward lower margin, faster moving products.

· Question 7

1.2 out of 1.2 points

Correct

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

Refer to the information for Ramos Company. In a percentage change income statement over the period of 2009 to 2011, what is the change in net income?

Selected Answer:

27.6%

· Question 8

1.2 out of 1.2 points

Correct

All of the following are common domestic risks faced by companies except:

Selected Answer:

technology

· Question 9

0 out of 1.2 points

Incorrect

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

Selected Answer:

Income from continuing operations

· Question 10

1.2 out of 1.2 points

Correct

Which of the following properly links the factors affecting a firm’s ability to generate cash with its need to use cash in investing? Ability to generate cash Need to use cash

Selected Answer:

Sales of existing plant assets Plant capacity requirements

· Question 11

0 out of 1.2 points

Incorrect

	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%

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

Selected Answer:

8.6%

· Question 12

1.2 out of 1.2 points

Correct

Which of the following properly links the factors affecting a firm’s ability to generate cash with its need to use cash in financing? Ability to generate cash Need to use cash

Selected Answer:

Borrowing capacity Debt service requirements

· Question 13

1.2 out of 1.2 points

Correct

Carl Industries Carl Industries has condensed balance sheets as shown:

	2011	2010	2009
Assets:
Current assets	$55,000	$56,500	$70,000
Plant & equipment, net	495,000	410,000	440,000
Intangible assets, net	20,000	27,500	40,000
Total assets	$570,000	$494,000	$550,000

Liabilities & Stockholders’ Equity:
Current liabilities	$40,000	$35,000	$32,500
Long-term liabilities	395,000	310,000	375,000
Stockholders’ equity	135,000	149,000	142,500
Total liabilities & equity	$570,000	$494,000	$550,000

Refer to the information for Carl Industries. In a percentage change balance sheet over the period of 2009 to 2011, what is the change in current assets?

Selected Answer:

(21.4%)

· Question 14

0 out of 1.2 points

Incorrect

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

Refer to the information for Net Devices Inc. What is the rate of return on assets for Net Devices for 2011?

Selected Answer:

12.60%

· Question 15

1.2 out of 1.2 points

Correct

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

Marker’s Liabilities to Assets Ratio for 2012 is

Selected Answer:

63.1%

· Question 16

0 out of 1.2 points

Incorrect

	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%

Refer to the information for Extreme Sports Company and All Sports Corporation. Calculate All Sports’ inventory turnover ratio

Selected Answer:

5.3

· Question 17

1.2 out of 1.2 points

Correct

Below are various states of financial distress: 1. defaulting on a principal payment on debt 2. restructuring debt 3. liquidating a firm 4. filing for bankruptcy 5. failing to make a required interest payment on time What is the order of increasing gravity that analysts typically consider when assessing credit risk and bankruptcy risk according to a continuum of financial distress?

Selected Answer:

5, 2, 1, 4, 3

· Question 18

0 out of 1.2 points

Incorrect

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

Refer to the information for Mobile Company. Mobile's Operating Cash Flow to Current Liabilities ratio in 2010 was

Selected Answer:

.70

· Question 19

0 out of 1.2 points

Incorrect

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

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

Refer to the information for Orca Industries. Orca’s asset turnover is

Selected Answer:

1.31

· Question 20

0 out of 1.2 points

Incorrect

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

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

Refer to the information for Orca Industries. The profit margin for computing ROA for Orca Industries is

Selected Answer:

4.8%

· Question 21

1.2 out of 1.2 points

Correct

Carl Industries Carl Industries has condensed balance sheets as shown:

	2011	2010	2009
Assets:
Current assets	$55,000	$56,500	$70,000
Plant & equipment, net	495,000	410,000	440,000
Intangible assets, net	20,000	27,500	40,000
Total assets	$570,000	$494,000	$550,000

Liabilities & Stockholders’ Equity:
Current liabilities	$40,000	$35,000	$32,500
Long-term liabilities	395,000	310,000	375,000
Stockholders’ equity	135,000	149,000	142,500
Total liabilities & equity	$570,000	$494,000	$550,000

Refer to the information for Carl Industries. In a common size balance sheet for 2009, total liabilities and equity are expressed as

Selected Answer:

100%

· Question 22

1.2 out of 1.2 points

Correct

Which of the following are better indicated by percentage change statements than common-size statements?

Selected Answer:

growth and decline

· Question 23

0 out of 1.2 points

Incorrect

Changes in interest rates can typically affect firms in all of the following ways except:

Selected Answer:

The value of liabilities with fixed interest rates.

· Question 24

1.2 out of 1.2 points

Correct

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

Selected Answer:

dependence on one or a few suppliers

· Question 25

1.2 out of 1.2 points

Correct

Univariate bankruptcy prediction models help identify factors related to bankruptcy, but they do not provide information about

Selected Answer:

the relative importance of individual financial statement ratios.

Wednesday, March 5, 2014 10:39:19 AM EST