Module 1 - Framework for Analysis and Valuation

1. Which of the following organizations doesnotcontribute to the formation of GAAP?
2. FASB (Financial Accounting Standards Board)
3. IRS (Internal Revenue Service)
4. AICPA (American Institute of Certified Public Accountants)
5. SEC (Securities and Exchange Commission)
6. Rocky Beach reports the following dollar balances in its retained earnings account.
7. ($ millions)2017 2016
8. Retained earnings............. 8,968.1 8,223.9
9. During 2017, Rocky Beach reported net income of $1,351.4 million. What amount of dividends, if any, did Rocky Beach pay to its shareholders in 2017?
10. $607.2 million
11. No dividends paid
12. $301.2 million
13. $744.2 million
14. At the beginning of a recent year,The Walt Disney Company's liabilities equaled $26,197 million. During the year, assets increased by $400 million and year-end assets equaled $50,388 million. Liabilities decreased $100 million during the year.
15. What were beginning and ending amounts for Walt Disney's equity?
16. $26,197 million beginning equity and $24,291 million ending equity
17. $23,791 million beginning equity and $27,042 million ending equity
18. $23,791 million beginning equity and $24,291 million ending equity
19. $27,042 million beginning equity and $25,183 million ending equity
20. Assume thatStarbucksreported net income for a recent year of $564 million. Its stockholders' equity is $2,229 million and $2,090 million, respectively.
21. Compute its return on equity.
22. a. 13.0% b. 22.8% c. 26.1% d. 32.7%
23. Cambridge Business Publishers, 2018

Practice Quiz, Module 1 1-1

1. Nokiamanufactures, markets, and sells phones and other electronics. Assume that Nokia reported net income of 3,582 on sales of 34,191 and total stockholders' equity of 14,576 and 14,871, respectively.
2. What is Nokia's return on equity?
3. a. 24.3% b. 42.3% c. 17.7% d. 10.5%
4. The total assets ofDell, Inc.equal $15,470 million and its equity is $4,873 million. What is the amount of its liabilities, and what percentage of financing is provided by Dell's owners?
5. $20,343 million, 24.0%
6. $10,597 million, 31.50%
7. $10,597 million, 68.5%
8. $20,343 million, 76.0%
9. The total assets ofFord Motor Companyequal $315,920 million and its liabilities equal $304,269 million. What is the amount of Ford's equity and what percentage of financing is provided by its owners?
10. $ 11,651 million, 3.9%
11. $620,189 million, 49.1%
12. $620,189 million, 50.9%
13. $ 11,651 million, 3.7%
14. Following are selected ratios of Canary Corp. for 2017 and 2016.

Return on Assets (ROA) Component

Profitability (Net income/Sales) ............... Productivity (Sales/Average net assets) .......

Compute the company's return on assets (ROA) for 2017.

a. 30.0% b. 19.2% c. 12.1% d. 31.2%

2017 2016

26% 22% 1.2 1.1

Cambridge Business Publishers, 2018

1-2 Financial Statement Analysis & Valuation, 5thEdition

9. Nickle Company reports net income of $800 million for its fiscal year ended January 2017. At the beginning of that fiscal year, Nickle Company had $5,000 million in total assets. By fiscal year-end 2017, total assets had grown to $6,500 million.

What is Nickle's return on assets (ROA)?

a. 13.9% b. 16.0% c. 12.3% d. 10.7%

10. The following table contains financial statement information for Izzy Corporation.

($ millions)

2016 ................................ 2017 ................................

Total Assets

$105,000 $125,000

Net Income

$10,000 $11,000

Sales

$95,000 $100,000

Equity

$30,000 $31,000

Compute the return on equity (ROE) and return on assets (ROA) for 2017.

1. 25.5% ROE, 10.0% ROA
2. 31.9% ROE, 11.2% ROA
3. 36.1% ROE, 9.6% ROA
4. 37.2% ROE, 13.1% ROA