A company’s balance sheet shows the value of assets, liabilities, and stockholders’ equity atthe end of the fiscal year. for any given period of time at a specific point in time. over an annual period. -On a balance sheet, retained earnings are not “unspent cash” because theyhave been paid out to common stockholders. they have an arbitrarily assigned value. they are always changing. they have been used to finance the firm’s assets. -For both managers and external financial analysts, blank______ is the single most important accounting number found on the income statement. net income (net profit after tax) earning before interest and taxes (EBIT) earnings available for common stockholders operating profit -Earnings per share (EPS) is calculated by dividingpretax income by the number of shares of common stock outstanding. dividing the dividends paid by the number of shares of common stock outstanding. dividing earnings available for common stockholders by the number of shares of common stock outstanding. dividing net profits after tax by the total number of preferred and common stock shares outstanding. -Net working capital is a measure of a firm’s overall liquidity. is defined as total assets minus current liabilities. reflects decreasing firm solvency as it increases all of the above -Why is the quick ratio a more appropriate measure of liquidity than the current ratio for a large-airplane manufacturer? It recognizes the contribution of all assets so that analysts can see how “quickly” a firm can satisfy its short-term obligations. It excludes inventory from the numerator of the ratio because it is difficult to convert inventory to cash and most sales are made on a credit basis. It recognizes that parts can be quickly converted to cash. It is not more appropriate. The current ratio would provide better information in this situation. -The one fixed asset that is not depreciated is blank________. cash. inventories. equipment. land. -Return on total assets (ROA) is equal to blank_________. netprofit margin x total asset turnover. the product of the components of the DuPont System. earnings available for common stockholders / total assets. all of the above. -When a firm has no “other income,” its operating profit and blank_____ are equal. netincome net profit after taxes EPS EBIT -The firm’s blank_______ are primarily interested in ratios that measure the short-term liquidity of the company and its ability to make principal and interest payments. boardof directors creditors owners financial managers -When evaluating financial ratios, analysts typically examine a firm’s ratio values comparedto firms in other industries compared to the firm’s previous years’ ratios compared to regional averages compared to firms with similar net profit margins -________ratios would provide the best information regarding total return to common stockholders. Profitability Activity Liquidity Debt -The firm’s managers use ratios to blank_____________ generatean overall picture of the company’s financial health. monitor the firm’s performance from period to period. isolate developing problems. all of the above -The blank_________ flows result from debt and equity financing transactions. financing operating investment cash -Which of the following is an inflow of corporate cash? Dividends Increasing treasury stock Depreciation charges Purchasing treasury bills -The bottom-up method for forecasting sales relieson the ability of complex statistical models to predict individual unit or regional sales figures, which are added together and reported to senior managers. relies on the ability of senior managers to determine sales objectives for their company’s product and inform personnel about targets for each business unit. relies on the ability of sales personnel to correctly apply statistical models in order to obtain firm-wide objectives for increased sales. relies on the ability of sales personnel to assess future demand, usually without the aid …
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