INSTRUCTIONS:

Please answer the questions in the attached Word doc.

Please type in your answers.

MGMT 4650 Financial/Ratio Analysis Quiz Name________________________________________ Major____________________ Write down or mark your answers clearly. Justify your answers by providing supporting information (for instance, calculated ratios) if the question requires it. Use the reverse sides of pages for any other calculations you need to perform. Make sure that you have filled in all the identification information asked for above Note: there are a total of 11 questions to answer. GOOD LUCK! 1. Fill in the blanks and give reasons: (10 points) Company A Company B ROE 2% 8% Profit Margin % 7% 4% TAT 1.7 3.0 ROA 11% 8.7% Generic Strategy How different are the two firms' financials? How are they related to their strategies? _________________________________________________________________________________ ________________ _________________________________________________________________________________ ________________ __________ Use this information to answer the following questions 2 to and 6. 1 New Tech Company Income Statement Sales 2007 2008 2009 100 110 120 Cost of goods sold Depreciation General, sales & admin expenses 50 20 51 20 52 20 70 65 60 Taxes 10 10 10 -50 -36 -22 2007 40 2008 45 2009 40 60 100 55 100 60 100 40 10 50 40 10 50 35 15 50 100 100 100 Net Income Balance Sheet Current Assets Property, plant & equipment Total Assets Current Liabilities Long-Term Liabilities Equity Total Liabilities & Equity Industry Average Ratios 200 200 7 2008 9 CR (Current Ratio) DR (Debt Ratio) TAT PM Sales Growth Profit Growth 1.5 1.5 1 50% 2 50% 2.2 50% 2.5 4% 6% 3% 5% 2.50 % 5% 25% 20% 3% 2. Which of the following items do not characterize New Tech Company ? EXPLAIN with the appropriate ratios/measures. (10) A. positive sale growth B. high debt C. increasing profit margin D. all the above characterize New Tech Company 2 3. Which expense item shows the greatest growth in percentage terms at New Tech? EXPLAIN with numerical calculations. (5) A. B. C. D. Costs of goods sold Depreciation General, sales and admin. Taxes 4. Using the figures above, in what year would you anticipate New Tech will REPORT a profit? EXPLAIN with numerical calculations. (5) A. B. C. D. 2010 2011 2012 2013 5. The change in ROA for New Tech over the period is due to A. PM B. TAT C. both D. neither. Explain using the appropriate ratio(s). (5) 6. The trend for New Tech's asset turnover is: EXPLAIN! (5) A. Increasing 3 B. Decreasing C. Staying the same D. Can't tell 7. The trend for New Tech's current ratio is: EXPLAIN! (5) A. B. C. D. Increasing Decreasing There is no trend Can't tell __________ The information below is excerpted from the financial statements of two companies. Use this information to answer questions 8-9 (in $ million) Company Company B A Net revenues 31296 107958 Net income 1288 3426 Total current assets 29564.5 18672.5 Total assets Total current liabilities 15370 12708.5 Total liabilities 32030 24671 Total stockholders' 5403.5 17823 equity Footnote: Approximately 98% of Company A's account receivables are from unpaid balances carried by customers using the store credit card. 8. Which company is less liquid (i.e., more risky in the short-term)? Justify using appropriate ratio(s). (10 points) 4 _________________________________________________________________________________ ________________ _________________________________________________________________________________ ________________ _________________________________________________________________________________ ________________ 9. Which company is more leveraged? Justify using appropriate ratio(s). (10 points) _________________________________________________________________________________ ________________ _________________________________________________________________________________ ________________ _________________________________________________________________________________ ________________ Use the information below to answer questions 10-11 5 Table -1 % growth in revenues from 2008 to 2009 6 7 10. Calculate and show % change in revenues for Airline carriers (with primary SIC code 4512) for the year 2009 ONLY (from 2008 to 2009). Compare and benchmark the growth rate using the industry growth in Table-1 above. Which airline carrier is better in terms being able to increase their revenues in the year 2009? Which company is the worst? Interpret your analysis by using the information given in the \"Key Points-Current Environment\" table as well. (20 points) 8 11. For the year-end 2008 (from 2007 to 2008), which airline carrier (with primary SIC code 4512) was able to increase their profit per each $1 worth of revenues they have generated over that year? Name and create the type of the statement (s) you need to use for such analysis? (15 points) 9 Financial/Ratio Analysis Quiz Name________________________________________ Write down or mark your answers clearly. Justify your answers by providing supporting information (for instance, calculated ratios) if the question requires it. Use the reverse sides of pages for any other calculations you need to perform. Make sure that you have filled in all the identification information asked for above Note: there are a total of 11 questions to answer.GOOD LUCK! 1. Fill in the blanks and give reasons: (10 points) Company A Company B ROE 2% 8% Profit Margin % 7% 4% TAT 1.7 3.0 ROA 11% 8.7% Generic Strategy How different are the two firms' financials? How are they related to their strategies? - MAKE SURE THIS ANSWER IS CORRECT, THEN DETERMINE THE TYPES OF STRATEGY AND FINANCIALS. TIE BACK THE FINANCIALS/RATIOS TO THE TYPE OF STRATEGY. IS IT COST LEADERSHIP? DIFFERENTIATION? WHY? The financial ratios shown in the table shows that Company B has a better return on equity compared to Company A. The return on equity shows that Company B has a better return on shareholders' equity than company A. On the other hand, company A has a much better profit margin compared to company B meaning that it can it is more efficient in converting net sales to net income. However, Company A by virtue of having a lower TAT ratio means that it is not efficient in utilizing its assets to generate sales. This might be an indication that the company is undeforming despite the fact that it has a higher profit margin ratio. Return on assets refers to the proportion of net income to total assets. Company A has a better return on Assets compared to company B. In conclusion, there is very little distinction between the two companies, however company A has a little edge over company B in as it is more profitable compared to B._____________________________________________________________________ Use this information to answer the following questions 2 to and 6. New Tech Company Industry Average Ratios 1 Income Statement Sales 2007 2008 2009 100 110 120 Cost of goods sold Depreciation General, sales & admin expenses 50 20 51 20 52 20 70 65 60 Taxes 10 10 10 -50 -36 -22 2007 40 2008 45 2009 40 60 100 55 100 60 100 40 10 50 100 40 10 50 100 35 15 50 100 Net Income Balance Sheet Current Assets Property, plant &equipment Total Assets Current Liabilities Long-Term Liabilities Equity Total Liabilities &Equity CR (Current Ratio) DR (Debt Ratio) TAT PM Sales Growth Profit Growth 200 7 2008 200 9 1.5 1.5 1 50% 2 50% 2.2 50% 2.5 4% 6% 3% 5% 2.50 % 5% 25% 20% 3% 2. Which of the following items do not characterize New Tech Company ? EXPLAIN with the appropriate ratios/measures. (10) - NOTE: PAY ATTENTION TO THE WORDING OF THE QUESTION: \"NOT\" USING THE INDUSTRY AVERAGE TABLE EXPLAIN WHY ONE OF THESE CHOICES DO NOT CHARACTERIZE IS COMPANY. A. positive sale growth B. high debt C. increasing profit margin D. all the above characterize New Tech Company 3. Which expense item shows the greatest growth in percentage terms at New Tech? EXPLAIN with numerical calculations. (5) - NOTE: USE THE ROA FORMULA. OU WILL FIND THE CORRECT ANSWER. A. B. C. D. Costs of goods sold Depreciation General, sales and admin. Taxes 2 The information below is excerpted from the financial statements of two companies. Use this information to answer questions 8-9 (in $ million) Company Company B A Net revenues 31,296 107,958 Net income 1,288 3,426 Total current assets 29,564.5 18,672.5 Total assets 37,433.5 42,494 Total current liabilities 15,370 12,708.5 Total liabilities 32,030 24,671 Total stockholders' 5403.5 17823 equity Footnote: Approximately 98% of Company A's account receivables are from unpaid balances carried by customers using the store credit card. Use the information below to answer questions10-11 3 Table -1 % growth in revenues from 2008 to 2009 4 5 6 10. Calculate and show % change in revenues for Airline carriers (with primary SIC code 4512) for the year 2009 ONLY (from 2008 to 2009). Compare and benchmark the growth rate using the industry growth in Table-1 above. Which airline carrier is better in terms being able to increase their revenues in the year 2009? Which company is the worst? Interpret your analysis by using the information given in the \"Key Points-Current Environment\" table as well. (20 points) - Notes: There is a table for industry averages for Europe. There is also a part about current environment, key points. Without using these you will not be able to interpret the financials. Whis was the story behind those numbers? 11. For the year-end 2008 (from 2007 to 2008), which airline carrier (with primary SIC code 4512) was able to increase their profit per each $1 worth of revenues they have generated over that year? Name and create the type of the statement (s) you need to use for such analysis? (15 points) NOTE - PLEASE ANSWER QUESTION AND SHOW CALCULATIONS. 7 8 Financial/Ratio Analysis Quiz Name________________________________________ Write down or mark your answers clearly. Justify your answers by providing supporting information (for instance, calculated ratios) if the question requires it. Use the reverse sides of pages for any other calculations you need to perform. Make sure that you have filled in all the identification information asked for above Note: there are a total of 11 questions to answer.GOOD LUCK! 1. Fill in the blanks and give reasons: (10 points) Company A Company B ROE 2% 8% Profit Margin % 7% 4% TAT 1.7 3.0 ROA 11% 8.7% Generic Strategy How different are the two firms' financials? How are they related to their strategies? - MAKE SURE THIS ANSWER IS CORRECT, THEN DETERMINE THE TYPES OF STRATEGY AND FINANCIALS. TIE BACK THE FINANCIALS/RATIOS TO THE TYPE OF STRATEGY. IS IT COST LEADERSHIP? DIFFERENTIATION? WHY? The financial ratios shown in the table shows that Company B has a better return on equity compared to Company A. The return on equity shows that Company B has a better return on shareholders' equity than company A. On the other hand, company A has a much better profit margin compared to company B meaning that it can it is more efficient in converting net sales to net income. However, Company A by virtue of having a lower TAT ratio means that it is not efficient in utilizing its assets to generate sales. This might be an indication that the company is undeforming despite the fact that it has a higher profit margin ratio. Return on assets refers to the proportion of net income to total assets. Company A has a better return on Assets compared to company B. In conclusion, there is very little distinction between the two companies, however company A has a little edge over company B in as it is more profitable compared to B._____________________________________________________________________ Use this information to answer the following questions 2 to and 6. New Tech Company Industry Average Ratios 1 Income Statement Sales 2007 2008 2009 100 110 120 Cost of goods sold Depreciation General, sales & admin expenses 50 20 51 20 52 20 70 65 60 Taxes 10 10 10 -50 -36 -22 2007 40 2008 45 2009 40 60 100 55 100 60 100 40 10 50 100 40 10 50 100 35 15 50 100 Net Income Balance Sheet Current Assets Property, plant &equipment Total Assets Current Liabilities Long-Term Liabilities Equity Total Liabilities &Equity CR (Current Ratio) DR (Debt Ratio) TAT PM Sales Growth Profit Growth 200 7 2008 200 9 1.5 1.5 1 50% 2 50% 2.2 50% 2.5 4% 6% 3% 5% 2.50 % 5% 25% 20% 3% 2. Which of the following items do not characterize New Tech Company ? EXPLAIN with the appropriate ratios/measures. (10) - NOTE: PAY ATTENTION TO THE WORDING OF THE QUESTION: \"NOT\" USING THE INDUSTRY AVERAGE TABLE EXPLAIN WHY ONE OF THESE CHOICES DO NOT CHARACTERIZE IS COMPANY. A. positive sale growth B. high debt C. increasing profit margin D. all the above characterize New Tech Company 3. Which expense item shows the greatest growth in percentage terms at New Tech? EXPLAIN with numerical calculations. (5) - NOTE: USE THE ROA FORMULA. OU WILL FIND THE CORRECT ANSWER. A. B. C. D. Costs of goods sold Depreciation General, sales and admin. Taxes 2 The information below is excerpted from the financial statements of two companies. Use this information to answer questions 8-9 (in $ million) Company Company B A Net revenues 31,296 107,958 Net income 1,288 3,426 Total current assets 29,564.5 18,672.5 Total assets 37,433.5 42,494 Total current liabilities 15,370 12,708.5 Total liabilities 32,030 24,671 Total stockholders' 5403.5 17823 equity Footnote: Approximately 98% of Company A's account receivables are from unpaid balances carried by customers using the store credit card. Use the information below to answer questions10-11 3 Table -1 % growth in revenues from 2008 to 2009 4 5 6 10. Calculate and show % change in revenues for Airline carriers (with primary SIC code 4512) for the year 2009 ONLY (from 2008 to 2009). Compare and benchmark the growth rate using the industry growth in Table-1 above. Which airline carrier is better in terms being able to increase their revenues in the year 2009? Which company is the worst? Interpret your analysis by using the information given in the \"Key Points-Current Environment\" table as well. (20 points) - Notes: There is a table for industry averages for Europe. There is also a part about current environment, key points. Without using these you will not be able to interpret the financials. Whis was the story behind those numbers? 11. For the year-end 2008 (from 2007 to 2008), which airline carrier (with primary SIC code 4512) was able to increase their profit per each $1 worth of revenues they have generated over that year? Name and create the type of the statement (s) you need to use for such analysis? (15 points) NOTE - PLEASE ANSWER QUESTION AND SHOW CALCULATIONS. 7 8