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3A-W'08-EXAM#3-PRACTICE PROBLEMS

3A-W'08-EXAM#3-PRACTICE PROBLEMS - • For “Net income”...

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ECON 3A-W’08-EXAM#3(FINAL)-PRACTICE PROBLEMS CH13-FINANCIAL STATEMENT ANALYSIS Using the financial statements for Pfizer in the Supplement (pp32-35), compute and interpret ratios as follows: 1. Compute all liquidity, solvency, profitability, and market ratios illustrated in class for both for 2005 and 2004. 2. Is Pfizer able to meet its current obligations? Cite relevant ratios. 3. Would you walk to the mailbox with confidence on interest payment dates if you were a holder of Pfizer’s long-term debt? Cite relevant ratios. 4. Explain the decrease in Pfizer’s stock price in terms of its profitability. What may be the reason Pfizer’s stock price did not drop even more? Additional information, hints, reminders, etc.: Costs and expenses include interest expense of $488 (2005) and $359 (2004). “Provision for income taxes” is the same as “Income tax expense.”
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Unformatted text preview: • For “Net income” use income before irregular items. • Pfizer has both common and preferred equity. For ROCE, the denominator is common equity. “If it ain’t preferred, it’s common,” so simply subtract the preferred amount from total SE to get common SE. • For free cash flow, use total dividends paid per the SCF. • For ROCE use preferred dividends declared per the statement of SE (see the retained earnings column). • For the dividend payout rate, use common dividends declared per stmt of SE. • Year-end per share stock prices were $23.32 (2005) and $26.89 (2004). Common dividends per share were $0.76 (2005) and $0.68 (2004). • Use year-end amounts wherever a formula calls for an average. • Use total sales for credit sales. • Express all ratios as demonstrated in the text and in lecture. CH12-STATEMENT OF CASH FLOWS TEXT P630 PROBLEMS 12-7A,8-A...
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