Use the table for the question(s) below. Consider the following income statement and other informati
Use the table
for the question(s) below.
Consider the
following income statement and other information:
Luther
Corporation
Consolidated
Income Statement
Year
ended December 31 (in $ millions)
2009
2008
Total sales
610.1
578.3
Cost of sales
(500.2)
(481.9)
Gross profit
109.9
96.4
Selling, general, and
administrative expenses
(40.5)
(39.0)
Research and development
(24.6)
(22.8)
Depreciation and amortization
(3.6)
(3.3)
Operating income
41.2
31.3
Other income
—
—
Earnings before interest and taxes (EBIT)
41.2
31.3
Interest income (expense)
(25.1)
(15.8)
Pre-tax income
16.1
15.5
Taxes
(5.5)
(5.3)
Net income
10.6
10.2
Price per
share
$16
$15
Shares outstanding (millions)
10.2
8.0
Stock options outstanding (millions)
0.3
0.2
Stockholders’
Equity
126.6
63.6
Total Liabilities and Stockholders’ Equity
533.1
386.7
10) If Luther’s
accounts receivable were $55.5 million in 2009, then calculate Luther’s
accounts receivable days for 2009.
11) Luther’s
EBIT coverage ratio for the year ending December 31, 2008 is closest to:
A) 1.64
B) 1.78
C) 1.98
D) 2.19
12) Luther’s
EBIT coverage ratio for the year ending December 31, 2009 is closest to:
A) 1.64
B) 1.78
C) 1.98
D) 2.19
13) Wyatt Oil
has a net profit margin of 4.0%, a total asset turnover of 2.2, total assets of
$525 million, and a book value of equity of $220 million. Wyatt Oil’s current return-on-equity (ROE) is
closest to:
A) 8.8%
B) 9.5%
C) 21.0%
D) 22.8%
Use the table
for the question(s) below.
Consider the
following income statement and other information:
Luther
Corporation
Consolidated
Income Statement
Year
ended December 31 (in $ millions)
2009
2008
Total sales
610.1
578.3
Cost of sales
(500.2)
(481.9)
Gross profit
109.9
96.4
Selling, general, and
administrative expenses
(40.5)
(39.0)
Research and development
(24.6)
(22.8)
Depreciation and amortization
(3.6)
(3.3)
Operating income
41.2
31.3
Other income
—
—
Earnings before interest and taxes (EBIT)
41.2
31.3
Interest income (expense)
(25.1)
(15.8)
Pre-tax income
16.1
15.5
Taxes
(5.5)
(5.3)
Net income
10.6
10.2
Price per
share
$16
$15
Shares outstanding (millions)
10.2
8.0
Stock options outstanding (millions)
0.3
0.2
Stockholders’
Equity
126.6
63.6
Total Liabilities and Stockholders’ Equity
533.1
386.7
14) Luther’s
EBITDA coverage ratio for the year ending December 31, 2009 is closest to:
A) 1.64
B) 1.78
C) 1.98
D) 2.19
15) Wyatt Oil
has a net profit margin of 4.0%, a total asset turnover of 2.2, total assets of
$525 million, and a book value of equity of $220 million. Wyatt Oil’s current return-on-assets (ROA) is
closest to:
A) 8.8%
B) 9.5%
C) 21.0%
D) 22.8%
Use the
information for the question(s) below.
In November
2009, Perrigo Co. (PRGO) had a share price of $39.20. They had 91.33 million shares outstanding, a
market-to-book ratio of 3.76. In
addition, PRGO had $845.01 million in outstanding debt, $163.82 million in net
income, and cash of $257.09 million.
16) Perrigo’s
return on equity (ROE) is closest to:
A) 4.6%
B) 9.1%
C) 17.2%
D) 27%
Use the
following information for ECE incorporated:
Assets $200
million
Shareholder Equity $100 million
Sales $300
million
17) If ECE
reported $15 million in net income, then ECE’s Return on Equity (ROE) is:
A) 5.0%
B) 7.5%
C) 10.0%
D) 15.0%
18) If ECE’s
return on assets (ROA) is 12% , then ECE’s return on equity (ROE) is:
A) 10%
B) 12%
C) 18%
D) 24%
19) If ECE’s net
profit margin is 8% , then ECE’s return on equity (ROE) is:
A) 10%
B) 12%
C) 24%
D) 30%
20) The firm’s
asset turnover measures
A) the value of
assets held per dollar of shareholder equity.
B) the return
the firm has earned on its past investments.
C) the firm’s
ability to sell a product for more than the cost of producing it.
D) how
efficiently the firm is utilizing its assets to generate sales.
21) If Firm A
and Firm B are in the same industry and use the same production method, and
Firm A’s asset turnover is higher than that of Firm B, then all else equal we
can conclude
A) Firm A is
more efficient than Firm B.
B) Firm A has a
lower dollar amount of assets than Firm B.
C) Firm A has
higher sales than Firm B.
D) Firm A has a
lower ROE than Firm B.
22) The firm’s
equity multiplier measures
A) the value of
assets held per dollar of shareholder equity.
B) the return
the firm has earned on its past investments.
C) the firm’s
ability to sell a product for more than the cost of producing it.
D) how
efficiently the firm is utilizing its assets to generate sales.
23) If Alex
Corporation takes out a bank loan to purchase a machine used in production and
everything else stays the same, its equity multiplier will ________, and its
ROE will ________.
A) increase;
increase
B) decrease;
decrease
C) increase;
decrease
D) decrease;
increase
24) The DuPont
Identity expresses the firm’s ROE in terms of
A)
profitability, asset efficiency, and leverage.
B) valuation,
leverage, and interest coverage.
C)
profitability, margins, and valuation.
D) equity,
assets, and liabilities.
25) Suppose
Novak Company experienced a reduction in its ROE over the last year. This fall could be attributed to
A) an increase
in Net Profit Margin.
B) a decrease in
Asset Turnover.
C) an increase
in Leverage.
D) a decrease in
Equity.
26) If Moon
Corporation has an increase in sales, which of the following would result in no
change in its EBIT margin?
A) A
proportional increase in its net income
B) A
proportional decrease in its EBIT
C) A
proportional increase in its EBIT
D) An increase
in its operating expenses
27) If Moon
Corporation’s gross margin declined, which of the following is true?
A) Its cost of
goods sold increased.
B) Its cost of
goods sold as a percent of sales increased.
C) Its sales
increased.
D) Its net
profit margin was unaffected by the decline.
28) The
inventory days ratio measures
A) the average
length of time it takes a company to sell its inventory.
B) the average
length of time it takes the company’s suppliers to deliver its inventory.
C) the level of
sales required to keep a company’s average inventory on the books.
D) the
percentage change in inventory over the past year.
