Q1. FINANCIAL TRIVIA For the fiscal years ending below put a large circle in the box of the company that you guess has .
a. The greatest amount of assets. (This one is completed for you.)
b. The greatest amount of liabilities.
c. The greatest amount of revenue.
d. The greatest amount of net income.
Q2. FINANCIAL TRIVIA In each large circle, place the amount that you guess for .
a. The greatest amount of assets. (This is completed for you.)
b. The greatest amount of liabilities.
c. The greatest amount of revenue.
d. The greatest amount of net income.
Q3a. Compute the debt ratio for each company listed below. The debt ratio reveals the proportion of assets financed with debt. Debt ratio = Total liabilities / Total assets
b. Wal-Mart is primarily financed with (________ / equity), resulting in a debt ratio that is (less / ________) than 50.00%, whereas a company primarily financed with equity will have a debt ratio that is (________ / more) than 50.00%. Ford has a debt ratio greater than (50% / ________), indicating its liabilities are (________ / less) than its assets.
Q4a. Compute Return on Sales (ROS) for each company listed below. ROS reveals the portion of each revenue dollar that results in profit. ROS = Net income / Sales revenue
b. Wal-Mart has (__________ / less) revenue than Tiffany & Co, but Tiffany & Co has a (__________ / lower) ROS ratio than Wal-Mart. The ROS ratio for Tiffany & Co indicates __________ of every revenue dollar resulted in profit (net income), but for Wal-Mart only 3.89% of every revenue dollar resulted in profit.
c. For Wal-Mart, 96.11 cents of each revenue dollar went to pay for all of the costs of running the business, leaving 3.89 cents of each revenue dollar for profit.
d. The corporation with the strongest ROS ratio is (TIF / WMT / F).
How can a company increase its ROS ratio?
e. Does a low ROS ratio indicate a weak corporation? (_____ / No) Why?
Q5a. Compute Asset Turnover for each company listed below. Asset Turnover reveals how efficiently assets are used to generate revenue. Asset Turnover = Sales Revenue / Total Assets
b. The asset turnover ratios computed above are in the range (_______ 3 / 3 or more).
c. (TIF / _______ / F) has the strongest asset turnover, indicating the company makes profits by generating a large volume of revenue using relatively few assets. Wal-Mart generates __________ in revenue for every $1 invested in assets.
Q6a. Compute Return on Assets (ROA) for each company listed below. ROA reveals how efficiently a company uses its assets to generate profit (net income). A high ROA ratio depends on managing asset investments and controlling expenses to keep net income high. Analyze the components, ROS and Asset Turnover, to better understand corporate strategy (product-differentiation vs. low-cost strategies). ROA is the broadest measure of profitability.
ROA = Net Income / Total Assets
b. For each company below, compute ROA by multiplying the two components, Return on Sales and Asset Turnover (previously computed). ROA = ROS x Asset T/O
c. The corporation with the strongest overall measure of profitability is (_______ / WMT / F) with an ROA of ______ indicating that for each dollar invested in assets, the company generates, on average, ________ cents in profits. The corporation with the weakest ROA is (TIF / WMT / ____).
d. Wal-Mart has a (high / _______) ROS and a (_______ / low) Asset Turnover, indicating that a (_______ / product-differentiation) strategy is used, whereas Tiffany & Co has a (high / low) ROS and a (high / _______) Asset Turnover, indicating that a (low-cost / _______________) strategy is used. Ford Motor Company has (high / low) ROS and (high / _______) Asset Turnover, indicating that it is (doing well / _________________).
Q7a. The ratio that measures the ability to translate revenue into profit is the (Debt / _______ / Asset Turnover / ROA) ratio.
b. The ratio that measures the proportion of debt used to finance assets is the (_______ / ROS / Asset Turnover / ROA) ratio.
c. The broadest measure of profitability that can be broken down into components to better understand corporate strategy is the (Debt / ROS / Asset Turnover / _______) ratio.
d. A high (Debt / ROS / ______________ / ROA) ratio indicates a high-volume strategy