Homework Answers
| Earnings manipulation | |
| Days Sales in Recievables Index increases | More likely |
| Gross Margin Index decreases | Less likely |
| Asset Quality Index Increases | More likely |
| Depreciation Index decreases | Less likely |
| Leverage index increases | Less likely |
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or each of the following factors, determine if the given change or level of that factor...
Your firm follows a strict residual dividend policy. All else equal, which of the following factors...
Your firm follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in your firm's dividend per share? The company reduces the percentage of debt in its target capital structure. The number of profitable potential projects increases. Congress lowers the tax rate on capital gains. Earnings are unchanged, but the firm buys back shares of common stock. The firm's net income decreases.
ch14: 2. Other dividend policy issues Several factors affect a firm's ability to pay a dividend....
ch14: 2. Other dividend policy issues Several factors affect a firm's ability to pay a dividend. Three such factors are described in the table: profitability (an increase in net income), investment opportunities, and capital structure (an increase in the debt ratio). Use the table to indicate how a firm’s ability to pay a dividend is affected by the factors described.(Hint: Consider each factor in isolation, with everything else held the same.) a: Net income increases. The ability to pay dividends,...
Select the correct term for each of the following descriptions. These are not necessarily complete definitions,...
Select the correct term for each of the following descriptions. These are not necessarily complete definitions, but there is only one possible answer for each term. Descriptions Terms The level and nature of risk attributable to a firm's activities and operations, and ignoring the risks associated with the firm's capital structure. The situation in which outsiders, such as external shareholders, credits, suppliers, and customers have less and inferior information about a firm's past, current, and future conditions and prospects, compared...
Check my work Determine whether each the following statements describes variable costing (VO), full absorption costing...
Check my work Determine whether each the following statements describes variable costing (VO), full absorption costing (FA), or both (B): Measures gross margin as the difference between sales revenue and cost of goods sold. Used primarily for internal decision making. Has the highest net income when production is greater than sales. Shows the same profit for a given level of sales, regardless of production. 5. Has the highest cost of goods sold when sales are greater than production, 6. Accounts...
Problem 1: Financial Statement Ratio Analysis (40 points total) Use the following financial statements for Dell,...
Problem 1: Financial Statement Ratio Analysis (40 points total) Use the following financial statements for Dell, Inc. to answer the questions which follow: BALANCE SHEET (SMil) 2017 10,298 2018 7,972 % 28.9 2019 9,092 % 34.3 40.2 Cash & Short Term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Net Fixed Assets Intangibles Other Long Term Assets Total Assets 6,152 24.0 660 2.6 2,829 11.3 19.939 76.6 2,409 8.7 0 0 3,287 14.7 25,635 100.0 7,693 27.9 1,180...
QUESTION 4 As a barometer of short-term liquidity the current ratio is limited by the nature...
QUESTION 4 As a barometer of short-term liquidity the current ratio is limited by the nature of its components. All of the following are reasons that this is true except: C A firm could have a high current ratio but not be able to meet demands for cash because inventory is salable only at discounted rices. C The balance sheet is prepared as of a particular date and the actual amount of liquid assets may vary considerably from the date...
Problem 4-33 Clyde’s Well Servicing has the following financial statements. The balance sheet items, profit margin,...
Problem 4-33 Clyde’s Well Servicing has the following financial statements. The balance sheet items, profit margin, and dividend payout have maintained the same relationships the past couple of years; these relationships are anticipated to hold in the future. Clyde’s has excess capacity, so there is no expected increase in capital assets. Income Statement Sales $2,000,000 Cost of goods sold 1,260,000 Gross profit 740,000 Selling and administrative expense 400,000 Amortization 55,000 Earnings before interest and taxes 285,000 Interest 50,000 Earnings before...
Problem 2: AFN Consider the following financial information for the Royals, Inc.: In the most recent...
Problem 2: AFN
Consider the following financial information for the
Royals, Inc.:
In the most recent year, the firm had sales of $6,000 with a
profit margin of 8%. Management chose to pay out 50% of the firm’s
income to its shareholders. Royals, Inc. was operating at full
capacity.
The company expects to increase sales by 20% next year and hopes
to improve their profit margin by 2%.
Determine the company’s AFN for next year through use of the
formula:...
14. The DuPont equation Corporate decision makers and analysts often use a technique called DuPont analysis to understand and assess the factors that drive a company’s financial performance, as measur...
14. The DuPont equation Corporate decision makers and analysts often use a technique called DuPont analysis to understand and assess the factors that drive a company’s financial performance, as measured by its return on equity (ROE). Depending on the version used, the DuPont equation will deconstruct the firm’s ROE, its best measure of financial performance, into two or three important factors, or drivers. DuPont analysis can be conducted using either the traditional DuPont equation or the extended DuPont equation. The...
$10,006,000 7505000 $2,501,000 Given the following financial statements Sterling Company Income Statement for the Year Ended...
$10,006,000 7505000 $2,501,000 Given the following financial statements Sterling Company Income Statement for the Year Ended December 31, 2015 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate=40%) Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders Earnings per share (EPS) $293,000 635000 48200 192000 1168200 $1,332,800 212000...
Select the correct term for each of the following descriptions. These are not necessarily complete definitions, but there is only one possible answer for each term. Descriptions Terms The level and nature of risk attributable to a firm's activities and operations, and ignoring the risks associated with the firm's capital structure. The situation in which outsiders, such as external shareholders, credits, suppliers, and customers have less and inferior information about a firm's past, current, and future conditions and prospects, compared...
Check my work Determine whether each the following statements describes variable costing (VO), full absorption costing (FA), or both (B): Measures gross margin as the difference between sales revenue and cost of goods sold. Used primarily for internal decision making. Has the highest net income when production is greater than sales. Shows the same profit for a given level of sales, regardless of production. 5. Has the highest cost of goods sold when sales are greater than production, 6. Accounts...
Problem 1: Financial Statement Ratio Analysis (40 points total) Use the following financial statements for Dell, Inc. to answer the questions which follow: BALANCE SHEET (SMil) 2017 10,298 2018 7,972 % 28.9 2019 9,092 % 34.3 40.2 Cash & Short Term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Net Fixed Assets Intangibles Other Long Term Assets Total Assets 6,152 24.0 660 2.6 2,829 11.3 19.939 76.6 2,409 8.7 0 0 3,287 14.7 25,635 100.0 7,693 27.9 1,180...
QUESTION 4 As a barometer of short-term liquidity the current ratio is limited by the nature of its components. All of the following are reasons that this is true except: C A firm could have a high current ratio but not be able to meet demands for cash because inventory is salable only at discounted rices. C The balance sheet is prepared as of a particular date and the actual amount of liquid assets may vary considerably from the date...
Problem 2: AFN
Consider the following financial information for the
Royals, Inc.:
In the most recent year, the firm had sales of $6,000 with a
profit margin of 8%. Management chose to pay out 50% of the firm’s
income to its shareholders. Royals, Inc. was operating at full
capacity.
The company expects to increase sales by 20% next year and hopes
to improve their profit margin by 2%.
Determine the company’s AFN for next year through use of the
formula:...
$10,006,000 7505000 $2,501,000 Given the following financial statements Sterling Company Income Statement for the Year Ended December 31, 2015 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate=40%) Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders Earnings per share (EPS) $293,000 635000 48200 192000 1168200 $1,332,800 212000...
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