Examen Navidad

An analyst has calculated the following ratios for a company:

Operating profit margin 17.5%

Net profit margin 11.7%

 Total asset turnover 0.89 times

 Return on assets (ROA) 10.4%

Financial leverage 1.46

Debt to equity 0.46

 The company’s return on equity (ROE) is closest to:

The following financial data are available for a company:

 Return on assets (ROA) 4.8% T

otal asset turnover 1.92

 Financial leverage 1.75

 Dividend payout ratio 48.1%

 The company’s sustainable growth rate is closest to:

Which of the following ratios will most likely result in an increase in a company’s sustainable growth rate?

The following information is given about a company:

What is the most appropriate conclusion an analyst can make about the solvency of the company? Solvency has:

Private contracts, such as bank loan agreements, are most likely to provide
an effective disciplinary mechanism to insure high financial reporting quality
because:

An analyst has observed that the profit margins of a company have not
increased or decreased significantly in the last few years. Which of the following is the most appropriate inference that can be made as to how this observation affects the company’s credit risk? The company’s credit risk is:

If a company has a deferred tax asset reported on its statement of financial
position and the tax authorities reduce the tax rate, which of the following
statements is most accurate concerning the effect of the change? The existing
deferred tax asset will:

An analyst gathers the following information about a company:
LIFO reserve as of 31 December 2013 $420,000
LIFO reserve as of 31 December 2014 $450,000
Marginal tax rate 30%
If the company had used the first-in, first-out (FIFO) method instead of last-in,
first-out (LIFO), its 2014 net income would most likely have been:

Greene Corporation uses the last-in, first-out (LIFO) inventory method, but
most of the other companies in Greene’s industry use first-in, first-out (FIFO).
To best compare Greene’s financial statements with its competitors’, an analyst
would make which of the following adjustments to Greene’s ending inventory?
It should be:

The following information is available for a company that prepares its financial
statements in accordance with US GAAP:
● It has production facilities with a net book value of $28.4 million.
● Recently, several other companies have entered the market, and the company now estimates that it will be able to generate cash flows of only $3 million per year for the next seven years with its facilities.
● The firm has a cost of capital of 10%.
Reflecting these recent events related to its production facilities, the company’s
financial statements will most likely report (in millions) a:

An advantage to the lessee in a leasing agreement is most likely:

If a company purchases, at a premium, bonds that it expects to hold until maturity, they are most likely measured on the balance sheet at:

An increase in which of the following items would most likely result in an
increase in a company’s quick ratio, all else being held equal?

Which of the following is the most likely reason for an analyst to choose the
direct method rather than the indirect method for analyzing a firm’s operating
cash flows?

A company incurred the following unrealized holding gains in the current year:
● $100,000 on securities held for trading
● $500,000 on the foreign currency translation adjustment of a self-sustaining
non-domestic subsidiary
Other comprehensive income for the year is closest to:

4 Selected information for a company and its industry’s average return on equity
(ROE) is provided:

Which of the following is most likely a contributor to the company’s inferior
ROE compared with that of the industry? The company’s lower:

When forecasting earnings, an analyst’s best approach is to:

Which of the following is lowest in quality on the spectrum of GAAP conforming financial reports?

Which of the following techniques is most likely to provide a company with the
opportunity to inflate earnings?

A company has a building with a net carrying amount of $100,000 and a tax
base of $120,000. The tax rate was 20% when the asset was purchased, but it is
scheduled to be reduced to 17% this year. Which of the following will the company most likely report related to this building?

A company manufactures aluminum cans for the beverage industry and
prepares its financial statements in accordance with International Financial
Reporting Standards (IFRS). During its latest full fiscal year, the company
recorded the following:
Inventory Item
Amount €
(thousands)
Raw material aluminum costs 150,000
Storage of finished cans 15,000
Wasted aluminum materials from abnormal production errors
during the year 500
Transportation-in costs 640
Tax-related duties 340
Administrative overhead 7,500
Trade discounts due to volume purchases throughout the year 520
The total costs included in inventory (in € thousands) for the year are closest to:

A company purchased a warehouse for €35 million and incurred the following
additional costs in getting the warehouse ready for use:
● €2.0 million for upgrades to the building’s roof and windows
● €0.5 million to modify the interior layout to meet their needs (moving walls
and doors, inserting and removing partitions, etc.)
● €0.1 million on an orientation and training session to familiarize employees
with the facility
The cost to be capitalized to the building account (in millions) is closest to:

The following information is available for an asset purchased at the start of its
first year of operations (Year 1):
● Purchase price: $1.8 million
● Estimated useful life: 5 years
● Estimated residual value: $500,000
If the company uses the double declining balance method of depreciation, the
depreciation expense in Year 3 will be closest to:

Under IFRS, it is most appropriate to include which of the following pension
costs of a defined-benefit plan in other comprehensive income?

If a company repurchases its own shares and can reissue them at a later time,
these shares are best described as:

Last year, a company’s current ratio was 0.96. Partial information is provided
from the company’s balance sheet for the current year:
Current Year ($ millions)
Cash and equivalents 1,950
Intangible assets 870
Inventory 950
Goodwill 4,990
Accounts receivable 2,540
Current portion of long-term debt 720
Total current liabilities 4,920
No other current assets or current liabilities were reported.
Comparing the company’s current ratio this year with the prior year most likely
indicates that the company’s ability to meet short-term obligations has:

The following information (in millions) on a company is available:
Cost of goods sold $500
Increase in total assets $250
Increase in total liabilities $200
Change in inventory –$30
Change in accounts payable –$25
The amount of cash (in millions) that the company paid to its suppliers is closest
to:

Compared with its net income, a mature company’s operating cash flow is most
likely:

A retailer provides credit cards only to its most valued customers who pass a
rigorous credit check. A credit card customer ordered an item from the retailer
in May. The item was shipped and delivered in July. The item appeared on the
customer’s July credit card statement and was paid in full by the due date in
August. The most appropriate month in which the retailer should recognize the
revenue is:

The following relates to a company’s common equity over the course of the
year:
Outstanding shares, at start of the year 2,000,000
Stock options outstanding, at start and end of the year (Exercise price:
$5) 100,000
Shares issued on 1 April 300,000
Shares repurchased (treasury shares) on 1 July 100,000
Average market price of common shares for the year $20/share
If the company’s net income for the year is $5,000,000, its diluted EPS is closest
to: