CHAPTER 3 ANALYZING FINANCIAL STATEMENTS
Questions
LG1LG5
1. Classify each of the following ratios according to a ratio category (liquidity ratio, asset
management ratio, debt management ratio, profitability ratio, or market value ratio).
a. Current rati
CHAPTER 14
FINANCIAL STATEMENT ANALYSIS
1.
a. Inventory turnover ratio in 2012
= = = 5.876
b. Debt to equity ratio in 2012
= = = 3.479
c. Cash flow from operating activities in 2012
Net income
Adjustments to Net Income
+ Depreciation
Change in AR
Change i
CHAPTER 4
THE FINANCIAL ENVIRONMENT:
MARKETS, INSTITUTIONS, AND INTEREST RATES
(Difficulty: E = Easy, M = Medium, and T = Tough)
Multiple Choice: Conceptual
Easy:
Financial markets
1
.
Answer: c
Diff: E
A secondary market.
A physical location auction mark
DQ 2
Cash Flow and Ratio Analysis
From Chapters 3 and 4 complete Study Problems 32 (page 85) and 42 (page 122) and post the answers to the discussion
board. Remember to complete all parts of the problems and report the results of your analysis. Do not f
1. Assume you are to receive a 10year annuity with annual payments of $800. The first payment will be received
at the end of Year 1, and the last payment will be received at the end of Year 10. You will invest each payment in
an account that pays 7 perce
CHAPTER TWO PROBLEMS
1.
Your corporation has the following cash flows:
Operating income
$250,000
Interest received
10,000
Interest paid
45,000
Dividends received
20,000
Dividends paid
50,000
If the applicable tax table is as follows:
Taxable Income
Rate

Chapter 10 Self Test
1. The net present value always provides the correct decision provided that
a. Capital rationing is not imposed
2. Forthenetpresentvalue(NPV)criteria,aprojectisacceptableifNPVis_,whileforthe
profitabilityindexaprojectisacceptableifPIi
CHAPTER 1
AN INTRODUCTION TO THE FOUNDATIONS OF
FINANCIAL MANAGEMENT THE TIES THAT BIND
TRUE/FALSE
1. The difference between the market value of the firm and the amount of money invested in the firm is
known as market value added.
Answer: True; Difficulty
Problem 616
a) Holding Period Returns
11Jul
11Aug
Sept
Oct
Nov
Dec
12Jan
Feb
March
April
May
June
MERECK
0.48
1.49%
1.88
5.74%
1.38
4.47%
2.34
7.93%
2.24
7.04%
0.74
2.50%
S&P 500 Index
28.36
2.15%
73.39
5.68%
87.47
7.18%
121.88 10.77%
6.3
Julie Banas
Question #1
A. You want to buy your first home and start building equity. You have saved $30,000 and are looking at homes that cost
mortgage is 3%. Payments will be made monthly starting at the end of the first month after you buy. In order to
NR
= RI
+
IP
+
DF
+
MP
+
LP
10 year treasury bond
NR
= RI
+
4% same
IP
same
+
DF
+
MP
same
+
LP
10 year corporate bond
NR
= RI
+
6.8% same
IP
same
+
MP
same
+
MP
?
+
+
LP
+
MP
Problem 21
0
DF
+
2.4%
0
LP
0.4%
total difference is 2.8%
.4% liquidity plus 2
Chapter 9
9.9
a) Internal Common equity
N= 5
PV=5
PMT=0
Growth Rate
9.86%
0.1674655172
Cost of Internal common equity
FV=8
CMT I/Y =9.856
16.74%
b) External common equity
0.1819565217
Cost of external common equity
18.19%
9.12
a) $140 (PVIFA 9%, 10 years
Mini Case
a)
M
GE
30Y
Microsoft
GE
MS
b)
Microsoft
GE
MS
c)
MS
5.25%
4.25%
10Y
4.75%
5Y
$896.76
$748.37
$800.98
$1,100.00 Expected Rate if Return
$1,030.00
$1,015.00
Increase
$690.41 Descrease
$646.69
$738.65
4.269
3.8823
4.4091
$1,216.15
$871.20
$870.24
Mini Case
n) Caledonia is considering two additional mutually exclusive projects. The free cash flows
associated with these projects are as follows:
Initial outlay
Inflow year 1
Inflow year 2
Inflow year 3
Inflow year 4
Inflow year 5
Project A
Project B
$
Chapter 4 Problem 13
NAICS Look up
So after looking up many keywords, one industry came somewhat similar.
It was Family Planning Centers Childbirth preperation classes: NAICS Code
621410.
Words with no results included: Doula, Birth, Maternity, Midwife,
a)
total fixed costs
variable costs
revenue
10143000
25137000
50439375
break even
20219706
b)
sales
varible costs
revenue before fixed
fixed costs
EBIT
Interest expense
Earning before tax
taxes
net income
50439375
25137000
25302375
10143000
15159375
148
CHAPTER 3
ANALYSIS OF FINANCIAL STATEMENTS
LEARNING OBJECTIVES
Explain why ratio analysis is usually the first step in the analysis of a companys
financial statements.
List the five groups of ratios, specify which ratios belong in each group, and explain
Question 1
2 out of 2 points
According to the perfect markets approach to dividend policy:
Answer
Selected
Answer:
Correct
Answer:
b.
the price of a share of stock is unrelated to dividend
policy.
b.
the price of a share of stock is unrelated to dividend
Selected practice questions from Chapters 6 8, FIN 335, with Dr.
Graham
From Chapter 6 Bonds and Bond Value
1. The stated interest payment, in dollars, made on a bond each period is called the bond's:
A) Coupon.
B) Face value.
C) Maturity.
D) Yield to mat
Managerial Finance
Formula Sheet
Average Tax Rate
Tax Liability
Taxable Income
Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders
Operating Cash Flow
 Net Working Capital
 Net Capital Spending
Cash Flow from Assets
EBIT
+ Deprec
FIN350 Sample Final
Version B
There will be 40 questions in the final exam. There will be NO question on the
measurement of free cash flows or standard deviation of investment returns.
The list of equations below will be reprinted on the final exam.
To to
Chapter 8 Problem 810
Dalton, Inc. has an 11.5 percent return on equity and
retains 55 percent of its earnings for reinvestment
purposes. It recently paid a dividend of $3.25 and
the stock is currently selling for $40
a) What is the growth rate of Dalton