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Exam 4: Profitability Analysis

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Question 1

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Examine the four following conditions involving inventory turnover.Discuss what economic factors might be leading to the condition and whether it suggests positive or negative future economic conditions.

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Condition A: Increasing cost of goods so...

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Question 2

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Carl Industries Carl Industries has condensed balance sheets as shown: Refer to the information for Carl Industries.In a common size balance sheet for 2009,total liabilities and equity are expressed as

A) 25.9%
B) 100%
C) 74.1%
D) 103.6%

E) A) and B)
F) B) and C)

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Question 3

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Rattigan Industries reported net income (amounts in thousands)for Year 4 of $60,615 on sales of $1,560,235.It declared preferred dividends of $22,100.Preferred shareholders' equity totaled $265,750 at both the beginning and end of Year 4.Common shareholders' equity totaled $298,150 at the beginning of Year 4 and $365,000 at the end of Year 4.Rattigan had no minority interest in its equity.Total assets were $1,440,000 at the beginning of Year 4 and $1,550,000 at the end of Year 4.

Extreme Sports Company and All Sports Corporation Below is financial information for two sporting goods retailers.Extreme Sports Company operates a retail business and franchising business.At the end 2011,Extreme Sports had 263 Company-owned and 120 franchise-operated retail stores.Extreme's stores are located in suburban,strip mall and regional mall locations,the company operates in 32 states.All Sports Corporation sells sporting goods and related products at over 2,500 Company-operated retail stores. Selected Data for All Sports and Extreme Sports (amounts in millions) Refer to the information for Extreme Sports Company and All Sports Corporation. Calculate All Sports' inventory turnover ratio

The profit margin for ROA indicates the ability of a firm to generate earnings for a particular level of

Freedom Company reported net income for 2010 of $2,031 million on sales of $25,600 million.Interest expense for 2010 was $235 million,and minority interest was $344 million for 2010.The income tax rate is 40 percent.Total assets were $10,800 million at the beginning of 2010 and $14,874 million at the end of 2010.Compute the rate of ROA for 2010 and disaggregate ROA into profit margin for ROA and asset turnover components.

Carl Industries Carl Industries has condensed balance sheets as shown: Refer to the information for Carl Industries.In a common size balance sheet for 2010,plant and equipment (net) is expressed as

The ability of a firm to manage the level of investment in assets for a particular level of sales is measured by the ______________________________.

________________________________________ is the level of earnings and the growth in the levels of earnings expected to persist in the future.

To reduce the risk inherent in ______________________________ a company should strive for a high proportion of variable costs in its cost structure.

Return on assets will likely differ across firms and across time.Three elements of risk that will help explain these differences are ________________________________________,cyclicality of sales and stage and length of product life cycle.

Grundig Technologies is a manufacturer.Below are the company's two most recent balance sheets and its most recent income statement.Use this information to answer the following questions:

Return on assets will likely differ across firms and across time.Three elements of risk that will help explain these differences are operating leverage,___________________________________,and stage and length of product life cycle.

The ability of a firm to generate income from operations given a particular level of sales is measured by the ______________________________.

Below is financial information for two sporting goods retailers.Extreme Sports Company operates a retail business and franchising business.At the end 2011,Extreme Sports had 263 Company-owned and 120 franchise-operated retail stores.Extreme's stores are located in suburban,strip mall and regional mall locations,the company operates in 32 states.All Sports Corporation sells sporting goods and related products at over 2,500 Company-operated retail stores. Selected Data for All Sports and Extreme Sports (amounts in millions)

Firms with high levels of operating leverage experience which of the following in comparison to firms with low levels of operating leverage

Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries.The company has an effective tax rate of 35%. Income Statement For the year ended December 31,2011 Refer to the information for Orca Industries.Orca's inventory turnover is

EPS is an ambiguous measure of profitability because it reflects operating performance in the numerator and ________________________________________ in the denominator.

One important difference between return on assets (ROA) and return on common shareholder's equity (ROCE) is

Sustainable earnings represent