Reading 41: Financial Analysis Techniques - LOS d ～ Q7-10 class, black, based, style, equity

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7.What was the ROE based on year-end equity?

A)   0.49.

B)   0.58.

C)   0.67.

D)   0.76.

8.Goldstar Manufacturing has an accounts receivable turnover of 10.5 times, an inventory turnover of 4 times, and payables turnover of 8 times. What is Goldstar’s cash conversion cycle?

A)   6.50 days.

B)   22.50 days.

C)   171.64 days.

D)   80.38 days.

 

9.An analyst gathered the following data about a company:

§ Current liabilities are $300.

§ Total debt is $900.

§ Working capital is $200.

§ Capital expenditures are $250.

§ Total assets are $2,000.

§ Cash flow from operations is $400.

If the company would like a current ratio of 2, they could:

A)   decrease current assets by 100 or increase current liabilities by 50.

B)   decrease current assets by 100 or decrease current liabilities by 50.

C)   increase current assets by 100 or decrease current liabilities by 50.

D)   increase current assets by 100 or increase current liabilities by 50.

 

10.A company has a receivables turnover of 10, an inventory turnover of 5, and a payables turnover of 12. The company’s cash conversion cycle is closest to:

A)   30 days.

B)   37 days.

C)   79 days.

D)   73 days.

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答案和详解如下：

7.What was the ROE based on year-end equity?

A)   0.49.

B)   0.58.

C)   0.67.

D)   0.76.

The correct answer was A)

ROE = Net income/Equity = 4,127/8,354 = 0.49

 

8.Goldstar Manufacturing has an accounts receivable turnover of 10.5 times, an inventory turnover of 4 times, and payables turnover of 8 times. What is Goldstar’s cash conversion cycle?

A)   6.50 days.

B)   22.50 days.

C)   171.64 days.

D)   80.38 days.

The correct answer was D)

The cash conversion cycle = average receivables collection period + average inventory processing period – payables payment period. The average receivables collection period = 365/average receivables turnover or 365/10.5 = 34.76. The average inventory processing period = 365/inventory turnover or 365/4 = 91.25. The payables payment period = 365/payables turnover ratio = 365/8 = 45.63. Putting it all together: cash conversion cycle = 34.76 + 91.25 – 45.63 = 80.38.

 

9.An analyst gathered the following data about a company:

§ Current liabilities are $300.

§ Total debt is $900.

§ Working capital is $200.

§ Capital expenditures are $250.

§ Total assets are $2,000.

§ Cash flow from operations is $400.

If the company would like a current ratio of 2, they could:

A)   decrease current assets by 100 or increase current liabilities by 50.

B)   decrease current assets by 100 or decrease current liabilities by 50.

C)   increase current assets by 100 or decrease current liabilities by 50.

D)   increase current assets by 100 or increase current liabilities by 50.

The correct answer was C)

For the current ratio to equal 2.0, current assets would need to move to $600 (or up by $100) or current liabilities would need to decrease to $250 (or down by $50). Remember that CA-CL=working capital (500-300=200).

 

10.A company has a receivables turnover of 10, an inventory turnover of 5, and a payables turnover of 12. The company’s cash conversion cycle is closest to:

A)   30 days.

B)   37 days.

C)   79 days.

D)   73 days.

The correct answer was C)

Cash conversion cycle = receivables days + inventory processing days – payables payment period.
Receivables days = 365/receivables turnover = 365/10 = 36.5 days.
Inventory processing days = 365/inventory turnover = 365/5 = 73.0 days.
Payables payment period = 365/payables turnover = 365/12 = 30.4 days.
Cash collection cycle = 36.5 + 73.0 – 30.4 = 79.1 days.