All else being equal, a company with older assets has a fixed asset turnover ratio that is:
A. lower compared to a company with newer assets.
B. the same compared to a company with newer assets.
C. higher compared to a company with newer assets.
Puse A, pensé mal
Correct Answer:
C. higher compared to a company with newer assets.
mira que me lo tenia aprendido por el accumulated depreciation, pues los older valen menos lo cual es higher turnover ratio
An analyst gathers the following information (in € thousands) about a company whose fiscal year ends on 31 December:
Earnings for the six months ended 30 June of Year 1 2,000
Earnings for the year ended 31 December of Year 1 1,500
Earnings for the six months ended 30 June of Year 2 2,200
The company’s trailing 12 month earnings (in € thousands) for the period ended 30 June of Year 2 is:
A. 1,700.
B. 3,700.
C. 4,200.
Correct Answer:
A. 1,700.
(Interpretation: H2 Year 1 =
1,500
−
2,000
=
−
500
1,500−2,000=−500; add H1 Year 2
2,200
2,200 →
−
500
+
2,200
=
1,700
−500+2,200=
An analyst gathers the following information about a company:
ROE 15%
Interest burden 0.85
EBIT margin 30%
Total asset turnover 1.1
Financial leverage 1.25
The average tax rate is closest to:
Incorrect answer:
A. 43%.
B. 47%.
C. 57%.
Por listillo y tonto es la c
Feedback
Based on your answer
Incorrect because it calculated the tax burden (42.78%, or ≈ 43%) instead of the average tax rate. Tax burden reflects one minus the average tax rate, or how much of a company’s pretax profits it gets to keep.
Correct because the fixed charge coverage ratio relates fixed financing charges, or obligations, to the cash flow generated by the company. It measures the number of times a company’s earnings (before interest, taxes, and lease payments) can cover the company’s interest and lease payments. Accordingly, Fixed charge coverage ratio = (EBIT + Lease payments) / (Interest payments + Lease payments) = (16 + 4) / (6 + 4) = 2.0.
For computing this ratio, an assumption sometimes made is that one-third of the lease payment amount represents interest on the lease obligation and that the rest is a repayment of principal on the obligation. For this variant of the fixed charge coverage ratio, the numerator is EBIT plus one-third of lease payments and the denominator is interest payments plus one-third of lease payments. Accordingly, Fixed charge coverage ratio = [EBIT + (Lease payments / 3)] / (Interest payments + (Lease payments / 3)) = (16 + 4/3) / (6 + 4/3) ≈ 2.36 which is also closest to 2.0.
A debt-to-equity ratio of 1.0 most likely results in a debt-to-capital ratio of:
A. 0.5.
B. 1.0.
C. 2.0.
Correct Answer:
A. 0.5.
Feedback
Based on your answer
Incorrect because it considers debt-to-capital ratio to be a financial leverage ratio.
Financial leverage = Total assets / Total equity.
debt-to-equity ratio = Total debt / Total shareholder’s equity = 1.0; or Total debt = Total shareholder’s equity.
Accordingly, Total assets = Total liabilities + Total shareholder’s equity while Total liabilities >= Total debt.
Accordingly, Total assets >= Total debt + Total shareholder’s equity; or (in this case) Total assets >=2 × Total shareholder’s equity; or Financial leverage = Total assets / Total shareholder’s equity >= 2. Thus, Financial leverage should be >= 2.
All else being equal, the cash conversion cycle most likely shortens if:
A. payables turnover decreases.
B. inventory turnover decreases.
C. days of sales outstanding increases.
Correct Answer:
A. payables turnover decreases.
Feedback
Based on your answer
Incorrect because the Cash conversion cycle = Days of inventory on hand + Days of sales outstanding – Number of days of payables. An increase in the Days of sales outstanding would increase, not decrease, the cash conversion cycle.
no pensé joder
Comparison of a company’s financial results to other peer companies for the same time period is called:
A. time-series analysis.
B. common-size analysis.
C. cross-sectional analysis.
Feedback
General feedback
C is correct. Cross-sectional analysis involves the comparison of companies with each other for the same time period. Time-series or trend analysis is the comparison of financial data across different time periods. Common-size analysis involves expressing financial data in relation to a single financial statement item, or base
Brown Corporation had average days of sales outstanding of 19 days in the most recent fiscal year. Brown wants to improve its credit policies and collection practices and decrease its collection period in the next fiscal year to match the industry average of 15 days. Credit sales in the most recent fiscal year were $300 million, and Brown expects credit sales to increase to $390 million in the next fiscal year. To achieve Brown’s goal of decreasing the collection period, the change in the average accounts receivable balance that must occur is closest to:
A. +USD0.41 million.
B. –USD0.41 million.
C. –USD1.22 million.
Correct Answer:
A. +USD0.41 million.
Based on the data in Exhibit 1, what is the analyst least likely to conclude?
A. Inventory management has contributed to improved liquidity.
B. Management of payables has contributed to improved liquidity.
C. Management of receivables has contributed to improved liquidity.
, Not Selected
Least LIKELY COÑO
no leí
Feedback
General feedback
C is correct. The analyst is unlikely to reach the conclusion given in Statement C because days of sales outstanding increased from 23 days in FY1 to 25 days in FY2 to 28 days in FY3, indicating that the time required to collect receivables has increased over the period. This is a negative factor for Spherion’s liquidity. By contrast, days of inventory on hand dropped over the period FY1 to FY3, a positive for liquidity. The company’s increase in days payable, from 35 days to 40 days, shortened its cash conversion cycle, thus also contributing to improved liquidity.
Based only on the information above, the most appropriate conclusion is that, over the period FY13 to FY15, the company’s:
A. net profit margin and financial leverage have decreased.
B. net profit margin and financial leverage have increased.
C. net profit margin has decreased but its financial leverage has increased.
Pregunta 38, realmente me ha costado
Correct Answer:
C. net profit margin has decreased but its financial leverage has increased.
Feedback
General feedback
C is correct. The company’s net profit margin has decreased and its financial leverage has increased. ROA = Net profit margin × Total asset turnover. ROA decreased over the period despite the increase in total asset turnover; therefore, the net profit margin must have decreased.
ROE = Return on assets × Financial leverage. ROE increased over the period despite the drop in ROA; therefore, financial leverage must have increased.
Other factors held constant, the reduction of a company’s average accounts payable because of suppliers offering less trade credit will most likely:
A. not affect the operating cycle.
B. reduce the operating cycle.
C. increase the operating cycle.
Correct Answer:
A. not affect the operating cycle.çç
Feedback
Based on your answer
Incorrect. As per above, payables are not part of the operating cycle calculation.
OperatingCycle=DaysInventoryonHand(DIH)+DaysSalesOutstanding(DSO)
A company’s most recent balance sheet shows the following values (NZ$ thousands):
Accounts payable 3,800
Long-term debt 5,590
Other long-term liabilities 800
Common stock 1,200
Retained earnings 1,810
The company’s debt-to-capital ratio is closest to:
A. 0.65.
B. 0.77.
C. 1.86.
Correct Answer:
A. 0.65.
Debt (only interest-bearing):
→ Long-term debt = 5,590
→ Other long-term liabilities = 800
→ Accounts payable are not interest-bearing → ❌ exclude
The following selected financial information is available:
Metric
Sales $421,000
Cost of goods sold (COGS) 315,000
Cash 30,000
Average accounts receivable 40,000
Average inventories 36,000
Average accounts payable 33,000
The company’s cash conversion cycle (in days) is closest to:
A. 76.4.
B. 45.2.
C. 38.2.
Correct Answer:
C. 38.2.
where
DSO
=
AR
Sales
/
365
DSO=
Sales/365
AR
,
DIH
=
Inventory
COGS
/
365
DIH=
COGS/365
Inventory
,
DPO
=
AP
COGS
/
365
DPO=
COGS/365
AP
.
An analyst gathers the following information (in € thousands) about a company:
Year 2 Year 1
Revenue 2,400 2,000
Cost of sales 1,800 1,400
Ending accounts payable 180 220
Based only on this information, the payables turnover ratio for Year 2 is:
A. 9.
B. 10.
C. 12.
ERROR DE NOVATO
CONFIADO
Correct Answer:
A. 9.Correct Answer:
An analyst gathers the following information (in € thousands) about a manufacturing company:
Year 2 Year 1
Average total assets 500 450
Average total liabilities 400 330
Average total shareholders’ equity 100 120
EBIT 35 40
Interest payments 5 8
Based only on this information, which of the following ratio(s) may indicate improved solvency from Year 1 to Year 2?
A. Interest coverage ratio only
B. Financial leverage ratio only
C. Both interest coverage ratio and financial leverage ratio
Fuera coñas, es vd que tengo prisa , pero estoy teniendo errores por no pensar suficiente y creer qeu higher es mejor y no siempre, puto depende del ratio y dema´s
Correct Answer:
A. Interest coverage ratio only
Feedback
Based on your answer
Incorrect because the Financial leverage ratio = Average total assets/Average shareholders’ equity. Accordingly, Year 1 Financial leverage ratio = 450/120 ≈ 3.75 and Year 2 Financial leverage ratio = 500/100 = 5. Therefore, financial leverage ratio has increased which results in higher leverage and weaker solvency. The interest coverage ratio measures the number of times a company’s EBIT could cover its interest payments. A higher interest coverage ratio indicates stronger solvency, offering greater assurance that the company can service its debt from operating earnings. Accordingly, Interest coverage ratio = EBIT/Interest payment. Year 1 Interest coverage ratio = 40/8 = 5 and Year 2 Interest coverage ratio = 35/5 = 7. Therefore, interest coverage ratio has increased which indicates stronger solvency.
