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# Financial Ratio Analysis

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11. Konstanz Company paid \$1,200 in sales commissions expense. What impact will this transaction have on working capital? (Points: 2)
Increase it
Decrease it
No impact
Not enough information is provided to answer the question.

12. The following balance sheet information was provided by Oleg Company:

Assuming net credit sales totaled \$120,000, what was the company's average days to collect receivables? (Points: 2)
18.3 days
21.5 days
60 days
52.1 days

13. You are considering an investment in a company's stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing. All of the following ratios can be used to assess solvency except: (Points: 2)
Number of times interest is earned
Net margin
Debt to equity ratio
Debt to assets ratio

14. The following partial balance sheet is provided for Templeton Company:

What is the company's debt to assets ratio? (Points: 2)
33%
50%
67%
41%

15. The Walter Wilson Company reported the following income for 2007:

What is the company's net margin? (Points: 2)
73%
40%
27%
18%

16. The Yarbrough Company reported net income of \$14,400 on gross sales of \$80,000. The company has average total assets of \$115,200, of which \$100,000 is property, plant and equipment. What is the company's return on investment? (Points: 2)
69.4%
18.0%
14.5%
12.5%

17. The Aloysius Company provided the following information from its financial records:

What is the amount of the company's earnings per share? (Points: 2)
\$0.72
\$0.76
\$0.80
\$25.00

18. The Zintrozak Company reported net income of \$50,000 on sales of \$300,000. The company has total assets of \$500,000 and total liabilities of \$100,000. What is the company's return on equity ratio? (Points: 2)
10.0%
12.5%
16.7%
50.0%

19. The Ulysses Company reported the following income for 2007:

What is the company's number of times interest is earned? (Points: 2)
4 times
6 times
7 times
10 times

20. Which of the following is an objective of ratio analysis? (Points: 2)
Assessing past performance
Assessing the prospects for future performance
Determining whether a company is likely to be able to pay its debts on time.
All of the above are objectives.

#### Solution Preview

For your convenience, I have attached a formatted MS Excel spreadsheet containing the information below. I have also attached notes, which might prove useful in gaining a better understanding of the subject matter.

11 Konstanz Company paid \$1,200 in sales commissions expense. What impact will
this transaction have on working capital? (Points: 2)

Increase it
No impact
Not enough information is provided to answer the question.

12 The following balance sheet information was provided by Oleg Company:

Assuming net credit sales totaled \$120,000, what was the company's
average days to collect receivables? (Points: 2)

18.3 days
21.5 days
...

#### Solution Summary

This posting contains a formatted MS Excel spreadsheet which contains various examples on the use of various ratios to perform an analysis of a company's financial condition through the use of a ratio analysis .

\$2.19
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## This question deals with review of the financial management policies and practices of Johnson and Johnson over the past two years. Also it calculates the important financial ratios.

Calculate the FINANCIAL & MARKET RATIOS for the year ended 31/12/07 & 31/12/06

Critically evaluate and comment on the results - Spotlight the areas the management should focus more

- Calculate k (cost of equity) by applying both the Gordon's Growth Model and the CAPM.
- Calculate the cost of each component of Capital for JNJ and the weighted cost of capital (WACC)

Then

Review the Financial Management policies and practices of JNJ over the past two years. Visit the website of the company.

Critically evaluate the financial management effectiveness of the company by commenting on:

- working capital policies
- dividend policies
- gearing policies
- risk management policies
- investment

Present your own suggestion on what changes you think might improve these principles.

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