FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Question 1

I. How long will it take to produce a product?II. Should customers be given 30 or 45 days to pay for their credit purchases?III. Should the firm borrow more money?IV. Should the firm acquire new equipment? a. I and IV onlyb. II and III onlyc. I, II, and III only

2. Which one of the following is a capital budgeting decision? a. determining how much debt should be borrowed from a particular lender

3. Which one of the following statements is correct? c. Partnerships are the most complicated type of business to form..

4. What is the change in the net working capital from 2006 to 2007? a. $1,379b. $553c. $1,887 5. What is the amount of the non cash expenses for 2007? a. $210b. $467c. $1,333d. $1,509e. $1,719 

6. What is the amount of the net capital spending for 2007? a. $780b. $2,238c. $2,918d. $3,747e. $3,841 

7. What is the operating cash flow for 2007? a. $1,847b. $2,900c. $3,308d. $3,536e. $4,172

 8. What is the cash flow from assets for 2007? a. $109b. $247c. $508d. $967e. $1,215 

9. What is the amount of net new borrowing for 2007? a. $540b. $300c. $0d. $300e. $540 

 10. What is the cash flow to creditors for 2007? a. $353b. $210c. $30011. What is the amount of dividends paid in 2007? a. $0b. $217c. $349d. $2,013e. $2,357 

 

12. What is the cash flow to stockholders for 2007? a. $582b. $401

13.  c. 7.56 percent

14.  d. $3,034.00

15.  c. 16.6

16. The principal amount of a bond that is repaid at the end of the term is called the: a. coupon.b. face value.c. maturity.

17.  c. floating-rate

18.  c. $916.26d. $1,453.10e. $1322.88

19.  e. $4,759

20.  a. $11.17

21.  b. $5.82

22. The advantages of the payback method of project analysis include the: I. application of a discount rate to each separate cash flow.II. bias towards liquidity.III. ease of use.IV. arbitrary cutoff point. d. II and IV only 

23. What should you do based on NPV analysis? c. accept both project A and project B

24. What should you do based on the payback period? e. extend the payback period for project A since it has a higher initial cost, which would make project A acceptable.

25. What should you do according to the profitability index? b. accept both project A and project B

26. What should you do based on the average accounting return? b. accept project A because the AAR is less than the required rate

Question 2

Comparison of Financial Data:

Comparison of one business with another can supply precious signs about the economic wellbeing of an organization. Unfortunately, dissimilarities in accounting procedures between businesses occasionally make it tough to contrast the companies' economic data. For demonstration if one firm standards its inventories by LIFO procedure and another firm by the mean cost procedure, then direct evaluation of economic facts and numbers for example inventory valuations and cost of items traded between the two companies may be misleading. Sometimes sufficient facts and numbers are offered in base remarks to the economic declarations to restate facts and numbers to a comparable basis. Otherwise, the analyst should hold in brain the need of comparability of the facts and numbers before drawing any decisive conclusion. Nevertheless, even with this limitation in brain, assessments of key ratios with other businesses and with commerce mean often propose avenues for further investigation (Weston, 1990).

Question 3

The Need to Look Beyond Ratios

An inexperienced analyst may suppose that ratios are adequate in themselves as a cornerstone for judgment about the future. Nothing could be farther from the truth. Conclusions founded on ratios investigation should be considered as tentative. Ratios should not be examined as an end, but ...