Questions and Answers of Accounting Financial Analysis

Suppose that in August 1997 you purchased shares in Staples, Inc. (NASDAQ: SPLS). It is now five years later and you decide to evaluate your holdings to see if you have done well with this
Repeat Problem 2 using the data below for Loweís Companies, Inc. However, this time you should create a copy of your worksheet to use as a template. Replace the data for Bed Bath &Beyond with that
Explain the purpose and understand the format of the firmís three basic financial statements: the income statement, the balance sheet, and the statement of cash flows. L01
Construct each of these statements in Excel with data for any company. L01
Link worksheets together so that formulas in one worksheet can reference data in another. L01
Use Excelís ìOutlineî tool to selectively display or hide parts of a financial statement.? L01
How to proceed from this point is largely a matter of preference. We could move line by line through the income statement, entering a label followed by the value.An alternative is to enter all of the
Using the data presented below:Aspen Industries Income Statement For the Years Ended December 31, 2004 and 2003 2004 2003 Sales 285,000 190,000 Cost of Goods Sold 215,000 143,000 Gross Profit 70,000
EdgarScan is a service of the ABAS Technology Group of PricewaterhouseCoopers which provides free access to all filings made by public companies in the United States. The site can be accessed at
Explain the purpose of the cash budget and how it differs from an income statement. L01
Calculate a firmís expected total cash collections and disbursements for a particular month. L01
Calculate a firmís expected ending cash balance and short-term borrowing needs. L01
Demonstrate how Excel can be used to determine the optimal timing of major cash expenditures. L01
Use the Scenario Manager to evaluate different assumptions in a model. L01
Use the various tools that Excel provides to find and fix errors in formulas. L01
Huggins and Griffin Financial Planners have forecasted revenues for the first six months of 2005 as shown in the following table.The firm collects 60% of its sales immediately, 39% one month after
You have recently been hired to improve the financial condition of Idaho Springs Hardware, a small chain of three hardware stores in the mountain communities of Colorado. On your first day the owner,
Describe what financial ratios are and who uses them. L01
Define the five major categories of ratios (liquidity, efficiency, leverage, coverage, and profitability). L01
Calculate the common ratios for any firm by using income statement and balance sheet data. L01
Use financial ratios to assess a firmís past performance, identify its current problems, and suggest strategies for dealing with these problems. L01
Calculate the economic profit of a firm. L01
The leader in this effort is the consulting firm Stern Stewart and Company who refer to economic profit by the copyrighted name Economic Value Added (EVA). L01
Economic profit is also measured by NPV, which is introduced in Chapter 10. The primary difference is that in this chapter we are trying to calculate the actual economic profit that was earned over
Chapter 9 covers the calculations necessary to calculate a firmís after-tax weighted average cost of capital. L01
Explain how the ìpercent of salesî method is used to develop pro-forma financial statements, and how to construct such statements in Excel. L01
Use the TREND function for forecasting sales or any other trending variables. L01
Perform a regression analysis with Excelís built-in regression tools. L01
Since you are reading this after the end of Proctor & Gambleís fiscal year 2003, how do your forecasts from the previous problems compare to the actual FY 2003 results? Does it appear that more
Choose your own company and the repeat the analysis from Problem 1. You can get the data from MoneyCentral Investor at http://moneycentral.msn.com/investor/home.asp. To retrieve the data for your
Differentiate between fixed and variable costs.
Calculate operating and cash break-even points, and find the number of units that need to be sold to reach a target level of EBIT.
Define the terms ìbusiness riskî and ìfinancial risk,î and describe the orgins of each of these risks.
Use Excel to calculate the DOL, DFL, and DCL and explain the significance of each of these risk measures.
Explain how the DOL, DFL, and DCL change as the firmís sales level changes.
Explain the concept of the time value of money. L01
Calculate the present value and future value of a stream of cash flows using Excel. L01
Explain the types of cash flows encountered in financial analysis, and how to adjust for each type in making time value calculations in Excel. L01
Differentiate between the alternative compounding periods, and use Excel to compare present and future values under different compounding schemes. L01
Upon starting your new job after college, youíve been confronted with selecting the investments for your 401k retirement plan.You have four choices for investing your money:• A money market fund
Given the following set of cash flows:a. If your required rate of return is 12% per year, what is the present value of the above cash flows? Future value?b. Now, suppose that you are offered another
Your five-year-old daughter has just announced that she would like to attend college. Your best guess is that it will cost approximately $25,000 per year (for four years) in tuition, books,rent, etc.
Differentiate among the definitions of ìvalueî and explain the importance of intrinsic value in making financial decisions. L01
Explain how intrinsic value is calculated by considering the size, timing, and perceived riskiness of the cash flows. L01
Explain the concept of ìrequired rate of returnî and calculate this rate using the Capital Asset Pricing Model (CAPM). L01
Show how any security (common or preferred stocks, bonds, etc.) can be valued in Excel or by hand. L01
Calculate the various bond return measures in Excel. L01
What are the expected cash flows? L01
When will the cash flows occur? L01
What is the required rate of return for this particular stream of cash flows? L01
As an analyst at Churnem & Burnem Securities, you are responsible for making recommendations to your firmís clients regarding common stocks. After gathering data on Denver Semiconductors, you have
As an investor, you are considering an investment in the bonds of the Conifer Coal Company. The bonds, which pay interest semiannually, will mature in eight years, and have a coupon rate of 9.5% on a
Using the Yahoo! Finance Web site (http://finance.yahoo.com)get the current price and five-year dividend history for Albertsons, Inc. To gather this data, enter the ticker symbol(ABS), choose Chart
Using the Bond Screener at the Yahoo! Finance Web site (http://bonds.yahoo.com/search.html), find a AAA rated corporate bond with at least 12 years to maturity. Click the link to get more detailed
Define ìhurdle rateî and show how it relates to the firmís Weighted Average Cost of Capital (WACC). L01
Calculate the WACC using both book- and market-value weights. L01
Calculate component costs of capital with flotation costs and taxes. L01
Explain how and why a firmís WACC changes as total capital requirements change.
Use Excel to calculate the ìbreak-pointsî in a firmís marginal WACC curve, and graph this curve in Excel. L01
TRM Consulting Services currently has the following capital structure:Debt is represented by 15 year original maturity bonds, issued 5 years ago with a coupon rate of 9%, which are currently selling
Suppose that TRM Consulting Services has discussed its need for capital with its investment bankers. The bankers have estimated that TRM can raise new funds in the capital markets under the following
Using the Yahoo! Finance Web site (http://quote.yahoo.com) get the current price and five-year dividend history for PPG Industries, Inc. (NYSE: PPG). Use the same procedure as in the Internet
Identify the relevant cash flows in capital budgeting. L01
Demonstrate the use of Excel in calculating the after-tax cash flows used as inputs to the various decision making techniques. L01
Compare and contrast the six major capital budgeting decision techniques (payback period, discounted payback, NPV, PI, IRR, and MIRR). L01
Explain scenario analysis, and show how it can be done in Excel. L01
Use Excelís Solver to determine the firmís optimal capital budget under capital rationing. L01
Chicago Turkey is considering building a new turkey farm to service their western region stores. The stores currently require 500,000 turkeys per year, and they are purchased from various local
You are considering an investment in two projects, A and B.Both projects have an initial cash outlay of $50,000 and the projected cash flows are as follows:a. Assuming that the WACC is 15%, calculate
The Chief Financial Officer of Eaton Medical Devices has determined that the firmís capital investment budget will be$5,000,000 for the upcoming year. Unfortunately, this amount is not sufficient to
Explain how risk can be incorporated into capital budgeting decisions, and show how to calculate the ìrisk-adjusted discount rateî(RADR) in Excel. L01
Explain five alternative techniques for incorporating risk into the analysis. L01
Explain diversification and give an example using Excel. L01
Calculate portfolio risk measures with Excel. L01
Choose two stocks from different industries that you think would have a low correlation. Get the closing prices for each month over the past five years for both stocks. To get the prices from Yahoo!
1.1 Which of the following is considered an entity in an REA data model? (a) Customer (b) Sale (c) Finished goods (d) All of the above are correct.
1.2 A construction company always let its customers make installment payments. When the company signs a contract with a customer, the customer is required to pay one percent of the total price as
1.3 A construction company only builds custom homes. So far, none of its customers has ordered two houses at one time. Which set of cardinality correctly shows the relationship between inventory and
1.4 A grocery store accepts cash, checks, and credit card payments from customers. Which set of cardi- nality correctly shows the relationship between sales and cash receipts? (a) Sales (0,1)-(0,1)
1.5 A large company with several business lines has different types of bank accounts with a few banks. Each business line has its own checking account for cash disbursements and cash receipts. Which
1.6 A traditional book store just started its e-business using a Web site to take customer orders. Which set of cardinality correctly shows the relationship between sales and salespeople? (a) Sales
1.7 A real estate company has many agents buying and selling residential properties and business sites. The company has quite high turnover rates of these agents. Which set of cardinality correctly
1.8 A retail company would like to store information about current and potential vendors who supply inventories to the company. Which set of cardinality correctly shows this relationship? (a)
1.9 Which one of the following statements about the REA data model is true? (a) Each resource is generally linked to at least two agents. (b) Each event is generally linked to at least three agents.
1.1 Cherokee Art and Antique Store Develop an REA diagram for Cherokee Art and Antique Store's expenditure cycle to model its pur- chasing and payment events related to artists/sellers given the
1.2 Cherokee Art and Antique Store Develop an REA diagram for Cherokee Art and Antique Store's acquisition activities to model its expenditures related to the purchasing of store furniture, office
1.3 Cherokee Art and Antique Store Develop an REA diagram for Cherokee Art and Antique Store's expenditure cycle to model its pur- chasing and payment events in general (not to include the
1.4 Velvet Lounge Background: Velvet Lounge is a premier upscale nightclub located in the heart of San Francisco. It has two levels, which are fully stocked with two bars on each level. Velvet Lounge
1.5 Worifree Properties, Inc. Background: Worifree Properties is a small start-up company that came into existence in the spring of 2005 with a total of six employees. Headquartered in San Jose,
2.1 In designing a database, what is the referential integrity rule? (a) The primary key in a table should not be null. (b) The foreign key in a table should not be null.(c) Each table must have a
2.2 In designing a database, what is the entity integrity rule? (a) The primary key in a table should not be null. (b) The foreign key in a table should not be null. (c) Each table must have a
2.3 Which table has repeating groups? (a) Student Table (Student ID, Student Name, Major, GPA) (b) Student Table (Student ID, Student Name, Major, Course#, Course Title) (c) Student Table (Student
2.4 Which table has transitive dependency? (a) Student Table (Student ID, Student Name, Major, Courses Taken, Grade) (b) Student Table (Student ID, Student Name, Major, Course#, Course Title, Grade)
2.5 How many tables are necessary to build a database according to the following data model? (a) 6 (b) 7 (c) 8 (d) 9 (e) 10 (0, N) Inventory Outflow Cash (1, N) (Bank Account) Inflow (1, N) Sale (0,
2.1 Creating an REA Diagram based on given tables Examine the following tables and indicate the primary key (using PK) and the foreign key(s) (using FK) for each table. Based on the given tables,
2.2 Cardinalities Considering each business situation, indicate the maximum and minimum cardinalities for the following events. The first one is done for you. Business situations 1. Cash sales 2.
2.3 Normalize a wholesale company's database Given below is the design of a Sales table for a wholesale company. Indicate the primary key for the table. Given the current design of this table, list
2.4 Normalize a library's database Given below is the table of data for a library. First, determine which attribute is the best primary key. Second, examine the table and indicate the anomalies that
2.5 Quest, Inc. The following tables and attributes exist in a relational database of Quest, Inc. First, draw a complete REA diagram for this database. You must include cardinalities. Determine the
3.1 Which of the following are the objects in Access? (a) Tables (b) Forms (c) Queries (d) Reports (e) All of the above.

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