101. Rent-a-Center
Selected data from the financial statements are provided below:
2015
2014
Current Assets
$12,000
$6,000
Long-Term Assets
14,000
8,000
Current Liabilities
4,000
6,000
Long-Term Liabilities
14,000
0
Stockholders’ Equity
8,000
8,000
Net Sales
19,000
18,200
Net Income
2,000
1,000
Refer to Rent-a-Center. Which of the following is true regarding the debt management ratios between 2014 and 2015?
102. Rent-a-Center
Selected data from the financial statements are provided below:
2015
2014
Current Assets
$12,000
$6,000
Long-Term Assets
14,000
8,000
Current Liabilities
4,000
6,000
Long-Term Liabilities
14,000
0
Stockholders’ Equity
8,000
8,000
Net Sales
19,000
18,200
Net Income
2,000
1,000
Refer to Rent-a-Center. What is the company’s asset turnover ratio for 2015?
103. The following information was included in a note to the 2015 financial statements of Romeo Productions:
The company has a loan agreement with First National Bank that states:
1.
The current ratio must be 2.0 or higher at all times.
2.
The debt-to-equity ratio must not exceed 0.7 at any time.
3.
The times interest earned ratio must be 5.0 or higher.
4.
The inventory turnover ratio must be 4.0 or higher.
The company’s ratios are: current ratio, 2.3; debt–to-equity ratio, 0.6; times interest earned ratio, 7.1; and inventory turnover ratio, 3.7. Based on this
information, the company was in default of its loan agreement because of the
104. Rio Imports
Information from the financial statements are provided below:
2015
2014
Current Liabilities
$460,000
$320,000
Long-Term Liabilities
240,000
640,000
Stockholders’ Equity
840,000
1,080,000
Net Cash Flows from Operating Activities
160,000
102,000
Interest and Principal Payments
24,000
16,000
Net Sales
950,000
900,000
Net Income
180,000
144,000
Interest Expense
17,000
23,000
Income Taxes
32,000
29,000
Dividends Paid to Common Stockholders
30,000
60,000
Refer to Rio Imports. The debt-to-equity ratio for 2015 is
105. Rio Imports
Information from the financial statements are provided below:
2015
2014
Current Liabilities
$460,000
$320,000
Long-Term Liabilities
240,000
640,000
Stockholders’ Equity
840,000
1,080,000
Net Cash Flows from Operating Activities
160,000
102,000
Interest and Principal Payments
24,000
16,000
Net Sales
950,000
900,000
Net Income
180,000
144,000
Interest Expense
17,000
23,000
Income Taxes
32,000
29,000
Dividends Paid to Common Stockholders
30,000
60,000
Refer to Rio Imports. The times interest earned ratio for 2015
106. Rio Imports
Information from the financial statements are provided below:
2015
2014
Current Liabilities
$460,000
$320,000
Long-Term Liabilities
240,000
640,000
Stockholders’ Equity
840,000
1,080,000
Net Cash Flows from Operating Activities
160,000
102,000
Interest and Principal Payments
24,000
16,000
Net Sales
950,000
900,000
Net Income
180,000
144,000
Interest Expense
17,000
23,000
Income Taxes
32,000
29,000
Dividends Paid to Common Stockholders
30,000
60,000
Refer to Rio Imports. The net profit margin percentage for 2015 is
107. Rio Imports
Information from the financial statements are provided below:
2015
2014
Current Liabilities
$460,000
$320,000
Long-Term Liabilities
240,000
640,000
Stockholders’ Equity
840,000
1,080,000
Net Cash Flows from Operating Activities
160,000
102,000
Interest and Principal Payments
24,000
16,000
Net Sales
950,000
900,000
Net Income
180,000
144,000
Interest Expense
17,000
23,000
Income Taxes
32,000
29,000
Dividends Paid to Common Stockholders
30,000
60,000
Refer to Rio Imports. Return on equity for 2015 is
108. Rio Imports
Information from the financial statements are provided below:
2015
2014
Current Liabilities
$460,000
$320,000
Long-Term Liabilities
240,000
640,000
Stockholders’ Equity
840,000
1,080,000
Net Cash Flows from Operating Activities
160,000
102,000
Interest and Principal Payments
24,000
16,000
Net Sales
950,000
900,000
Net Income
180,000
144,000
Interest Expense
17,000
23,000
Income Taxes
32,000
29,000
Dividends Paid to Common Stockholders
30,000
60,000
Refer to Rio Imports. The dividend payout ratio for 2015 is
109. Rio Imports
Information from the financial statements are provided below:
2015
2014
Current Liabilities
$460,000
$320,000
Long-Term Liabilities
240,000
640,000
Stockholders’ Equity
840,000
1,080,000
Net Cash Flows from Operating Activities
160,000
102,000
Interest and Principal Payments
24,000
16,000
Net Sales
950,000
900,000
Net Income
180,000
144,000
Interest Expense
17,000
23,000
Income Taxes
32,000
29,000
Dividends Paid to Common Stockholders
30,000
60,000
Refer to Rio Imports. The operating margin percentage for 2015 is an indicator that the company has
110. Rio Imports
Information from the financial statements are provided below:
2015
2014
Current Liabilities
$460,000
$320,000
Long-Term Liabilities
240,000
640,000
Stockholders’ Equity
840,000
1,080,000
Net Cash Flows from Operating Activities
160,000
102,000
Interest and Principal Payments
24,000
16,000
Net Sales
950,000
900,000
Net Income
180,000
144,000
Interest Expense
17,000
23,000
Income Taxes
32,000
29,000
Dividends Paid to Common Stockholders
30,000
60,000
Refer to Rio Imports. Which of the following statements is true concerning the company’s debt management activities?
111. Which of the following debt management ratios is the most inclusive for measuring the degree to which a
company relies on outsiders for financing?
112. Which of the following ratios is the best measure for analyzing a company’s efficiency in using assets to
produce sales revenues?
113. Selected financial data for Rescue Rooter are presented below:
2015
2014
Total liabilities
$1,205,000
$952,000
Common stock
250,000
225,000
Paid-in capital in excess of par—common stock
150,000
135,000
Retained earnings
155,000
145,000
The company’s debt–to-equity ratio for 2015 is
114. Return ratios are measures of the relationship between the
115. In considering equity and debt financing, which of the following statements is generally true?
116. A company issued additional shares of stock. Which of the following is true with regard to the effect of the
stock issuance transaction on the company’s ratio computations?
117. A company declared and paid $1 million in dividends to its common stockholders. The effect of this
transaction is that the
118. A company purchased inventory on credit. The effect of this transaction is that the
119. A company sold inventory on credit. Its gross profit percentage is 23%. The effect of this transaction is that
the
120. A company paid off a $100,000 two-year note payable. The effect of this transaction is that the
121. Which of the following is considered a profitability ratio?
122. Which stockholder ratio requires the use of dividends per share and the current market price?
123. Which of the following ratios is most useful in indicating a company’s profitability?
124. The return on assets ratio
125. When calculating the return on common equity ratio, dividends to preferred stockholders are deducted
from net income because
126. A company that uses leverage is attempting to earn an overall return that is higher than the cost of funds
received from
127. Randstad, Inc.
Information from the financial statements is provided below:
2015
2014
Net income
$150,000
$120,000
Cash dividends paid on preferred stock
15,000
15,000
Cash dividends paid on common stock
42,000
38,000
Average number of preferred shares outstanding
20,000
20,000
Average number of common shares outstanding
105,000
95,000
Market price per share of common stock at year-end
25.10
22.70
Refer to Randstad, Inc. Earnings per share for 2015 would be reported as
128. Randstad, Inc.
Information from the financial statements is provided below:
2015
2014
Net income
$150,000
$120,000
Cash dividends paid on preferred stock
15,000
15,000
Cash dividends paid on common stock
42,000
38,000
Average number of preferred shares outstanding
20,000
20,000
Average number of common shares outstanding
105,000
95,000
Market price per share of common stock at year-end
25.10
22.70
Refer to Randstad, Inc. The dividend payout ratio for 2015 is
129. Randstad, Inc.
Information from the financial statements is provided below:
2015
2014
Net income
$150,000
$120,000
Cash dividends paid on preferred stock
15,000
15,000
Cash dividends paid on common stock
42,000
38,000
Average number of preferred shares outstanding
20,000
20,000
Average number of common shares outstanding
105,000
95,000
Market price per share of common stock at year-end
25.10
22.70
Refer to Randstad, Inc. The dividend yield ratio for 2015 is
130. Rapid Sign Corporation
Selected data from the financial statements are presented below:
2015
2014
Net income
$110,000
$123,000
Cash dividends paid on common stock
42,000
38,000
Average number of common shares outstanding
140,000
145,000
Treasury Stock
70,000
0
Market price per share of common stock at year-end
16.00
13.00
Refer to Rapid Sign Corporation. What is the dividend payout ratio for 2015?
131. Rapid Sign Corporation
Selected data from the financial statements are presented below:
2015
2014
Net income
$110,000
$123,000
Cash dividends paid on common stock
42,000
38,000
Average number of common shares outstanding
140,000
145,000
Treasury Stock
70,000
0
Market price per share of common stock at year-end
16.00
13.00
Refer to Rapid Sign Corporation. What is the total payout ratio for 2015?
132. Rapid Sign Corporation
Selected data from the financial statements are presented below:
2015
2014
Net income
$110,000
$123,000
Cash dividends paid on common stock
42,000
38,000
Average number of common shares outstanding
140,000
145,000
Treasury Stock
70,000
0
Market price per share of common stock at year-end
16.00
13.00
Refer to Rapid Sign Corporation. What is the stock repurchase payout ratio for 2015?
133. Which of the following combinations of ratios will best analyze a company’s income statement
performance?
134. Earnings per share is an indication of how much
135. If a financial analyst wants to measure the relationship between profitability and the investment made by
stockholders, the analyst should use the
136. Because of its relationship to dividends and market price, which of the following ratios is most important
to investors?
137. DuPont analysis recognizes that the return on equity can be broken down into three aspects, which include
all of the following except:
138. Red Oak Manufacturing
The following information is available for the year ended December 31, 2015:
Net income
$ 844,200
Net sales
6,809,000
Average total assets
5,911,000
Average stockholders’ equity
2,575,000
Refer to Red Oak Manufacturing. DuPont analysis return on equity (ROE) is:
139. Red Oak Manufacturing
The following information is available for the year ended December 31, 2015:
Net income
$ 844,200
Net sales
6,809,000
Average total assets
5,911,000
Average stockholders’ equity
2,575,000
Refer to Red Oak Manufacturing. The total leverage per the DuPont analysis computation is:
140. All of the following are examples of questions that a financial analyst would ask about a company’s use of
estimates in the recording of expenses except:
141. Below is some information taken from the income statements of RPG and RPM Co.
RPG Co.
2015
2014
2013
Net Sales
$152,000
146,000
$140,000
Cost of Goods Sold
115,000
110,000
107,000
Gross Profit
$37,000
$36,000
$33,000
RPM Co.
Net Sales
$84,000
$83,000
$80,000
Cost of Goods Sold
70,000
69,000
68,000
Gross Profit
$14,000
$14,000
$12,000
A)
Using time series (or trend) analysis, comment on the trend of RPG’s cost of goods sold and gross profit.
B)
Using cross sectional analysis, compare RPG’s gross profit to that of RPM.
Growth in Gross Profit
2014 to 2015*
2013 to 2014**
RPG Co.
2.78%
9.09%
RPM Co.
0
16.67%
*
(2015 gross profit – 2014 gross profit) / 2014 gross profit
(2014 gross profit – 2013 gross profit) / 2013 gross profit
142. Regency Lighting
The current assets section of the company’s two most recent balance sheets are presented below:
2015
2014
Cash
$ 37,500
$ 29,400
Accounts receivable, net
78,750
96,600
Inventory
104,100
126,700
Other current assets
9,200
7,750
Total current assets
229,550
260,450
Total Assets
$1,325,000
$1,715,000
Refer to Regency Lighting. Complete a common size horizontal analysis of the current assets section of the balance sheet for 2015. Your answers
should be expressed as percentages and rounded to one decimal place. Provide a short explanation of this analysis.
143. Regency Lighting
The current assets section of the company’s two most recent balance sheets are presented below:
2015
2014
Cash
$ 37,500
$ 29,400
Accounts receivable, net
78,750
96,600
Inventory
104,100
126,700
Other current assets
9,200
7,750
Total current assets
229,550
260,450
Total Assets
$1,325,000
$1,715,000
Refer to Regency Lighting. Complete a common size vertical analysis of the current assets section of the balance sheet for 2015. Your answers
should be expressed as percentages and rounded to one decimal place.
2015
2014
Cash
2.8%
1.7%
Accounts receivable, net
5.9%
5.6%
Inventory
7.9%
7.4%
2015
2014
Cash
127.6%
100.0%
Accounts receivable, net
81.5%
100.0%
Inventory
82.2%
100.0%
Other current assets
118.7%
100.0%
Total current assets
88.1%
100.0%
144. Ready Mix USA
Three recent income statements are presented below:
2015
2014
2013
Net sales
$861,400
$762,200
$680,000
Cost of goods sold
430,200
410,400
400,000
Gross profit
431,200
351,800
280,000
Selling, general, and
administrative expenses
316,600
280,000
240,000
Other income, net
2,800
1,600
0
Income from operations
117,400
73,400
40,000
Interest expense
8,400
7,800
6,200
Income before taxes
109,000
65,600
33,800
Income taxes
40,200
22,200
12,000
Net income
$ 68,800
$ 43,400
$ 21,800
Refer to Ready Mix USA. Complete a common size horizontal analysis of the company’s income statements. Your answers should be expressed as
percentages and rounded to one decimal place. Provide a short explanation of this analysis.
Net sales
126.7%
112.1%
100.0%
Cost of goods sold
107.6%
102.6%
100.0%
Gross profit
154.0%
125.6%
100.0%
Other income, net
–
–
100.0%
Income from operations
293.5%
183.5%
100.0%
Interest expense
135.5%
125.8%
100.0%
Income before taxes
322.5%
194.1%
100.0%
Income taxes
335.0%
185.0%
100.0%
Net income
315.6%
199.1%
100.0%
145. Ready Mix USA
Three recent income statements are presented below:
2015
2014
2013
Net sales
$861,400
$762,200
$680,000
Cost of goods sold
430,200
410,400
400,000
Gross profit
431,200
351,800
280,000
Selling, general, and administrative
expenses
316,600
280,000
240,000
Other income, net
2,800
1,600
0
Income from operations
117,400
73,400
40,000
Interest expense
8,400
7,800
6,200
Income before taxes
109,000
65,600
33,800
Income taxes
40,200
22,200
12,000
Net income
$ 68,800
$ 43,400
$ 21,800
Refer to Ready Mix USA. Complete a common size vertical analysis of the company’s income statement for the three years. Your answers should
be expressed as percentages and rounded to one decimal place.
Net sales
100.0%
100.0%
100.0%
Cost of goods sold
50.0%
53.8%
58.8%
Gross profit
50.0%
46.2%
41.2%
Other income, net
0.3%
0.2%
0.0%
Income from operations
13.6%
9.6%
5.9%
Interest expense
1.0%
1.0%
0.9%
Income before taxes
12.7%
8.6%
5.0%
Income taxes
4.7%
2.9%
1.8%
Net income
8.0%
5.6%
146. Rhodes Bakery
The balance sheet taken from the company’s 2015 10-K is provided below:
December 31
Assets:
2015
2014
Current Assets:
Cash
$ 61,100
$54,000
Accounts Receivable
22,500
17,500
Inventory
8,500
7,000
Other Current Assets
6,500
5,500
Total Current Assets
98,600
84,000
Long-term Assets:
Property, Plant & Equipment, net
744,900
25,000
Intangible Assets
211,250
225,000
Total Assets
$1,054,750
$334,000
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable
$ 5,500
$ 4,500
Interest Payable
500
500
Current Portion of Long-Term Debt
15,000
0
Income Tax Payable
18,500
23,000
Total Current Liabilities
$ 39,500
28,000
Long-term Liabilities:
Notes Payable
246,250
15,000
Total Liabilities
285,750
43,000
Stockholders’ Equity
Common Stock
60,000
35,000
Additional Paid-in Capital
654,000
186,000
Retained Earnings
92,500
70,000
Treasury Stock
(37,500)
0
Total Stockholders’ Equity
769,000
291,000
Total Liabilities and Stockholders’ Equity
$1,054,750
$334,000
Refer to Rhodes Bakery. Prepare a common size balance sheet to be used in vertical analysis.
147. Rhodes Bakery
The balance sheet taken from the company’s 2015 10-K is provided below:
December 31
Assets:
2015
2014
Current Assets:
Cash
$ 61,100
$54,000
Accounts Receivable
22,500
17,500
Inventory
8,500
7,000
Other Current Assets
6,500
5,500
Total Current Assets
98,600
84,000
Long-term Assets:
Property, Plant & Equipment, net
744,900
25,000
Intangible Assets
211,250
225,000
Total Assets
$1,054,750
$334,000
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable
$ 5,500
$ 4,500
Interest Payable
500
500
Current Portion of Long-Term Debt
15,000
0
Income Tax Payable
18,500
23,000
Total Current Liabilities
$ 39,500
28,000
Long-term Liabilities:
Notes Payable
246,250
15,000
Total Liabilities
285,750
43,000
Stockholders’ Equity
Common Stock
60,000
35,000
Additional Paid-in Capital
654,000
186,000
Retained Earnings
92,500
70,000
Treasury Stock
(37,500)
0
Total Stockholders’ Equity
769,000
291,000
Total Liabilities and Stockholders’ Equity
$1,054,750
$334,000
Refer to Rhodes Bakery. Calculate the following short-term liquidity ratios for 2015 and 2014: Current Ratio, Quick Ratio, Cash Ratio, and
Operating Cash Flow Ratio. Cash flows from operations were $75,500 and $50,500 for 2015 and 2014, respectively. Round your answers to two
decimal places. Comment on the company’s short-term liquidity.
2015:
Current Ratio:
$98,600 current assets / $39,500 current liabilities = 2.50
Cash Ratio:
($61,100 cash + $0 short-term investments) / $39,500 current liabilities = 1.55
Operating Cash Flow Ratio:
$75,500 cash flows from operations / $39,500 current liabilities = 1.91
2014:
Current Ratio:
$84,000 current assets / $28,000 current liabilities = 3.00
Cash Ratio:
($54,000 cash + $0 short-term investments) / $28,000 current liabilities = 1.93
Operating Cash Flow Ratio:
$50,500 cash flows from operations / $28,000 current liabilities = 1.80