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Exam 4: Profitability Analysis

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Question 51

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Time-series analysis helps answer all of the following questions except:

A) Is the firm becoming more or less profitable over time?
B) Is the firm becoming more or less risky?
C) How is management of the firm responding to external economic forces?
D) What is the amount of assets or capital required to generate a particular level of earnings?

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

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Question 52

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Net Devices Inc. The following balance sheets and income statements are for Net Devices Inc.,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%. BALANCE SHEETS Refer to the information for Net Devices Inc.What is Net Devices' earnings per share for 2011?

A) $1.00
B) $1.70
C) $1.96
D) $0

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

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Question 53

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Discuss the economic characteristics of firms that have the following mix of profit margin and asset turnover.In addition provide an example of an industry that would have the relevant profit margin asset turnover mix: A.High profit margin and low asset turnover. B.Low profit margin and high asset turnover

Another term for earnings power is

In order to measure how profitable a firm is in generating a return for its common shareholders,a financial analyst would examine the return on _____________________________________________.

The three elements of risk that help in understanding differences across firms and changes over time in ROAs are:

Return on assets can be disaggregated into profit margin for return on assets and ______________________________.

Net Devices Inc. The following balance sheets and income statements are for Net Devices Inc.,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%. BALANCE SHEETS Refer to the information for Net Devices Inc.What is Net Devices' return on common shareholders' equity for 2011?

The rationale for adding back the _______________________________________________________ relates to attaining consistency in the numerator and denominator of ROA.

Ramos Company Ramos Company included the following information in its annual report: Refer to the information for Ramos Company.In a percentage change income statement over the period of 2009 to 2011,what is the change in sales?

Ramos Company Ramos Company included the following information in its annual report: Refer to the information for Ramos Company.In a common size income statement for 2011,the operating expenses are expressed as:

Use the following information about Sanibel Corporation to calculate the following ratios for 2011 (assume an effective tax rate of 35%):

One problem with using EPS as a measure of profitability is that it does not consider the amount of ____________________ or ____________________ required to generate a particular level of earnings.

Net Devices Inc. The following balance sheets and income statements are for Net Devices Inc.,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.For purposes of these questions assume that the company has an effective tax rate of 35%. BALANCE SHEETS Refer to the information for Net Devices Inc.What is Net Devices' capital structure leverage ratio for 2011?

Discuss how the following three elements of risk help us understand return on assets differs across firms and changes over time: 1.Operating leverage 2.Cyclicality of sales 3.Product life cycle

Firms with ____________________ levels of operating leverage experience greater variability in their return on assets.

Carl Industries Carl Industries has condensed balance sheets as shown: Refer to the information for Carl Industries.In a percentage change balance sheet over the period of 2009 to 2011,what is the change in long-term liabilities?