Question 1

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Wyatt Oil has a net profit margin of 4.0%,a total asset turnover of 2.2,total assets of $525 million,and a book value of equity of $220 million.Wyatt Oil's current return-on-assets (ROA)is closest to:
A) 8.8%
B) 9.5%
C) 21.0%
D) 22.8%

Accepted Answer

A) ROA = net profit margin x total asset turnover = 0.04 x 2.2 = 0.088 = 8.8%

Question 2

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Calculate Luther's return of equity (ROE),return of assets (ROA),and price-to-earnings ratio (P/E)for the year ending December 31,2008.

Accepted Answer

The answer of Use the table for the question(s) below.
Consider...

Question 3

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Luther's EBIT coverage ratio for the year ending December 31,2008 is closest to:
A) 1.64
B) 1.78
C) 1.98
D) 2.19

Accepted Answer

A) EBIT Coverage ratio = EBIT / (Interest Expense) = 41.2/25.1 = 1.6414

Question 4

Use the following information for ECE incorporated:
Assets $200 million
Shareholder Equity $100 million
Sales $300 million
-Luther's Operating Margin for the year ending December 31,2008 is closest to:
A) 0.5%
B) 0.7%
C) 5.4%
D) 6.8%

Accepted Answer

C) Operating Margin = Operating Income / Sales
OM = 31.3 / 578.3 = .054 or 5.4%

Question 5

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Luther's EBIT coverage ratio for the year ending December 31,2009 is closest to:
A) 1.64
B) 1.78
C) 1.98
D) 2.19

Accepted Answer

C) EBIT Coverage ratio = EBIT / (Interest Expense) = 31.3/15.8 = 1.981

Question 6

Use the following information for ECE incorporated:
Assets $200 million
Shareholder Equity $100 million
Sales $300 million
-If ECE reported $15 million in net income,then ECE's Return on Assets (ROA)is:
A) 5.0%
B) 7.5%
C) 10.0%
D) 15.0%

Accepted Answer

B) ROA = (Net Income)/Assets = $15 million/$200 million = 0.75 = 7.5%

Question 7

The firm's asset turnover measures
A) the value of assets held per dollar of shareholder equity.
B) the return the firm has earned on its past investments.
C) the firm's ability to sell a product for more than the cost of producing it.
D) how efficiently the firm is utilizing its assets to generate sales.

Accepted Answer

The firm's asset turnover measures how efficiently the firm is utilizing its assets to generate sales. It is calculated by dividing sales by total assets, indicating how much revenue is generated by each dollar of assets. Option A is incorrect as it describes the asset-to-equity ratio, option B is incorrect as it describes the return on investment (ROI), and option C is incorrect as it describes the profit margin.

Question 8

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-If Luther's accounts receivable were $55.5 million in 2009,then calculate Luther's accounts receivable days for 2009.

Accepted Answer

The answer of Use the table for the question(s) below.
Consider...

Question 9

Use the following information for ECE incorporated:
Assets $200 million
Shareholder Equity $100 million
Sales $300 million
-If ECE's return on assets (ROA)is 12% ,then ECE's return on equity (ROE)is:
A) 10%
B) 12%
C) 18%
D) 24%

Accepted Answer

D) ROA = (Net Income)/Assets = $X million/$200 million = 0.12; X = $24 million;
ROE = (Net Income)/(Shareholder Equity) = $24 million/$100 million = 0.24 = 24%

Question 10

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Luther's earnings before interest,taxes,depreciation,and amortization (EBITDA)for the year ending December 31,2009 is closest to:
A) 19.7 million
B) 37.6 million
C) 41.2 million
D) 44.8 million

Accepted Answer

D) EBITDA = EBIT + Depreciation & Amortization = 41.2 + 3.6 = $ 44.8 million

Question 11

Use the information for the question(s) below.
In November 2009, Perrigo Co. (PRGO) had a share price of $39.20. They had 91.33 million shares outstanding, a market-to-book ratio of 3.76. In addition, PRGO had $845.01 million in outstanding debt, $163.82 million in net income, and cash of $257.09 million.
-Perrigo's return on equity (ROE)is closest to:
A) 4.6%
B) 9.1%
C) 17.2%
D) 27%

Accepted Answer

C) ROE = (Net Income)/(B V Equity) = $163.82/(($39.20 x 91.33)/3.76) = 0.172 = 17.2%

Question 12

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Luther's return on assets (ROA)for the year ending December 31,2009 is closest to:
A) 1.6%
B) 2.0%
C) 2.3%
D) 2.6%

Accepted Answer

B) ROA = Net income / total assets.
This is a little tricky in that total assets aren't given in the problem. The student must remember the basic balance sheet equation A = L + SE. Total Liabilities and Shareholders' Equity is given and this is the same as total assets. So ROA = 10.6 / 533.1 = .0198 or 2.0%

Question 13

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Luther's Net Profit Margin for the year ending December 31,2008 is closest to:
A) 1.8%
B) 2.7%
C) 5.4%
D) 16.7%

Accepted Answer

A) Net Profit Margin = Net Income / Total Sales = 10.2 / 578.3 = .018 or 1.8%

Question 14

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Luther's EBITDA coverage ratio for the year ending December 31,2009 is closest to:
A) 1.64
B) 1.78
C) 1.98
D) 2.19

Accepted Answer

B) EBITDA Coverage ratio = (EBIT + Dep & Amort) / (Interest Expense) =
(41.2 + 3.6)/25.1 = 1.7849

Question 15

Use the following information for ECE incorporated:
Assets $200 million
Shareholder Equity $100 million
Sales $300 million
-If ECE reported $15 million in net income,then ECE's Return on Equity (ROE)is:
A) 5.0%
B) 7.5%
C) 10.0%
D) 15.0%

Accepted Answer

D) ROE = (Net Income)/(Shareholder Equity) = $15 million /$100 million = 0.15 = 15%

Question 16

Use the following information for ECE incorporated:
Assets $200 million
Shareholder Equity $100 million
Sales $300 million
-If ECE's net profit margin is 8% ,then ECE's return on equity (ROE)is:
A) 10%
B) 12%
C) 24%
D) 30%

Accepted Answer

C) net profit margin = (Net Income)/Sales = $X million/$300 million = 0.08; X = $24 million;
ROE = (Net Income)/(Shareholder Equity) = $24 million/$100 million = 0.24 = 24%

Question 17

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Wyatt Oil has a net profit margin of 4.0%,a total asset turnover of 2.2,total assets of $525 million,and a book value of equity of $220 million.Wyatt Oil's current return-on-equity (ROE)is closest to:
A) 8.8%
B) 9.5%
C) 21.0%
D) 22.8%

Accepted Answer

C) ROE = net profit margin x total asset turnover x leverage
ROE = 0.04 x 2.2 x (525/220) = 0.21 = 21%

Question 18

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Luther's price - earnings ration (P/E)for the year ending December 31,2009 is closest to:
A) 7.9
B) 10.1
C) 15.4
D) 16.0

Accepted Answer

C) P/E = Price / EPS or Market Cap / Earnings = (10.2 × $16) / $10.6 = 15.4

Question 19

Use the following information for ECE incorporated:
Assets $200 million
Shareholder Equity $100 million
Sales $300 million
-If ECE's return on assets (ROA)is 12% ,then ECE's net income is:
A) $6 million
B) $12 million
C) $24 million
D) $36 million

Accepted Answer

C) ROA = (Net Income)/Assets = $ X million/$200 million = 0.12; X = $24 million

Question 20

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-Luther's return on equity (ROE)for the year ending December 31,2009 is closest to:
A) 2.0%
B) 6.5%
C) 8.4%
D) 12.7%

Accepted Answer

C) ROE = Net income / shareholders' equity = 10.6 / 126.6 = .084 or 8.4%

Quiz 2: Introduction to Financial Statement Analysis

Use the table for the question(s) below. Consider the following income statement and other information: -Calculate Luther's return of equity (ROE),return of assets (ROA),and price-to-earnings ratio (P/E)for the year ending December 31,2008.

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's EBIT coverage ratio for the year ending December 31,2008 is closest to:

Use the following information for ECE incorporated: Assets $200 million Shareholder Equity $100 million Sales $300 million -Luther's Operating Margin for the year ending December 31,2008 is closest to:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's EBIT coverage ratio for the year ending December 31,2009 is closest to:

Use the following information for ECE incorporated: Assets $200 million Shareholder Equity $100 million Sales $300 million -If ECE reported $15 million in net income,then ECE's Return on Assets (ROA) is:

The firm's asset turnover measures

Use the table for the question(s) below. Consider the following income statement and other information: -If Luther's accounts receivable were $55.5 million in 2009,then calculate Luther's accounts receivable days for 2009.

Use the following information for ECE incorporated: Assets $200 million Shareholder Equity $100 million Sales $300 million -If ECE's return on assets (ROA) is 12% ,then ECE's return on equity (ROE) is:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's earnings before interest,taxes,depreciation,and amortization (EBITDA) for the year ending December 31,2009 is closest to:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's return on assets (ROA) for the year ending December 31,2009 is closest to:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's Net Profit Margin for the year ending December 31,2008 is closest to:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's EBITDA coverage ratio for the year ending December 31,2009 is closest to:

Use the following information for ECE incorporated: Assets $200 million Shareholder Equity $100 million Sales $300 million -If ECE reported $15 million in net income,then ECE's Return on Equity (ROE) is:

Use the following information for ECE incorporated: Assets $200 million Shareholder Equity $100 million Sales $300 million -If ECE's net profit margin is 8% ,then ECE's return on equity (ROE) is:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's price - earnings ration (P/E) for the year ending December 31,2009 is closest to:

Use the following information for ECE incorporated: Assets $200 million Shareholder Equity $100 million Sales $300 million -If ECE's return on assets (ROA) is 12% ,then ECE's net income is:

Use the table for the question(s) below. Consider the following income statement and other information: -Luther's return on equity (ROE) for the year ending December 31,2009 is closest to: