Financial Management
Trainor
Use
the following table for the next three questions. Pick the best or closest answer. There may be some rounding.
|
Stock
Table |
|
|
|
|
|
|
|
|
|
|
YTD |
52 –
WEEK |
|
|
YLD |
|
VOL |
|
NET |
|
|
%Chg |
Hi |
Lo |
Stock(SYM)
|
DIV |
% |
PE |
100s |
Close |
CHG |
|
25.0 |
44.50 |
25.25 |
Ford F |
|
2.5 |
|
10,000 |
35.00 |
0.75 |
1. If
Ford earned $2.20 per share last year, what should the PE ratio number be in
the above table?
a.
2.2
b. 22
c. 16
d. 77
2.
Using the information above, what was the price of Ford one year before
on this date?
a.
$28.00
b.
$25.25
c.
$44.50
d.
$43.75
3.
The DIV number was smudged with water.
What number should go there?
a.
0.025
b.
2.50
c.
0.88
d.
8.80
Use the following table for the next
question.
|
Corporate
Bond Table |
|
|
|
|
|
|
CUR |
|
|
NET |
|
BONDS |
YLD |
VOL |
CLOSE |
CHG |
|
GM X, Oct. 15, 2020 |
7.0 |
121,099 |
90.00 |
0.50 |
4. Based
on the table above, what is GM’s coupon payment each year?
a.
$70.00
b.
$90.00
c.
$63.00
d.
$128.57
5. If GM’s bond price rose to $110, what would the current yield be?
Know how to interpret all the WSJ tables in your handout.
Use the following for the next 10 questions.
Martin Manufacturing Company Income Statement
for the Year Ended December 31, 2004
Sales revenue $6,500,000
Less: Cost of goods sold 4,745,000
Gross profits $1,755,000
Less: Operating expenses
and administrative expense $1,365,000
Depreciation expense 185,000
Total operating expenses $1,550,000
Operating profits $ 205,000
Less: Interest expense 97,000
Net profits before taxes $ 108,000
Less: Taxes (40%) 43,200
Total profits after taxes $ 64,800
Martin Manufacturing Company
Balance Sheet
December 31, 2004
Assets 2003
Current assets
Accounts receivable 902,778 400,000
Inventories 677,857 1,000,000
Total current assets $1,605,635 1,420,000
Gross fixed assets $2,493,819 2,300,000
Less: Accumulated depreciation 685,000 600,000
Net fixed assets $1,808,819 1,700,000
Total assets $3,414,454 3,120,000
Liabilities and stockholders' equity
Current liabilities
Notes payable 311,000 350,000
Accruals 75,000 100,000
Total current liabilities $ 662,000 750,000
Long-term debts 1,363,904 1,026,250
Total liabilities $2,025,904 1,776.250
Stockholders' equity
Common stock (at par) 100,000 100,000
Paid-in capital in excess of par 193,750 193,750
Retained earnings 1,044,800 1,000,000
Total stockholders' equity $1,388,550 1,343,750
Total
liabilities and stockholders' equity $3,414,454 3,120,000
6 What is the current ratio for Martin Manufacturing?
7 What is the ROA for Martin Manufacturing?
8 What is the ROE for Martin Manufacturing?
9 What is the Net Profit Margin for Martin Manufacturing?
10. What is the Total Asset Turnover for Martin Manufacturing?
11. What is the Financial Leverage Multiplier for Martin Manufacturing?
12. What is the operating cash flow for Martin Manufacturing?
13. What is the Free Cash flow for Martin Manufacturing?
14. Has the change in current assets increased or decreased cash flow?
15. The accounts receivable for this firm last year was only $400,000. Is the increase any cause for concern?
16. Using the 5 year MACRS system, what would the depreciation expense by in year 3 for a machine purchased for $10,000? What is the accumulated depreciation on this asset, and what is the net asset value reported on the balance sheet for this machine?
17. A financial leverage multiplier of 2 means what?
Answers, 1 = c, 2 = a, 3 = c, 4 = c., 5 = 63/110 = 5.72%.
6. Current Assets/Current Liabilities = $1,605,635/662,000 = 2.4
7. ROA = Income/Tot. Assets = 64,800/[(3,414,454+3,120,000)/2]= 1.98%
8. ROE = Income/Tot. Equity = 64,800/[(1,388,550+1,343,750)/2]= 4.7%
9. Net profit margin = net income/Sales = 64,800/6,500,000 = 1%
10. Tot. Asset turnover = sales/tot. assets = 6,500,000/ [(3,414,454+3,120,000)/2]= 1.99
11. FLM = Total Assets/Total Equity. Note Total assets = total debt + total equity. Thus, FLM = 3,414,454/1,388,550 = 2.459. This means that for every $1 of equity invested, another $1.459 is borrowed. Also note that if you use this within the Dupont equation, you should use average total assets/average total equity since both net income and sales are in that equation.
12. OCF = EBIT – taxes + Depreciation = $205,000 – 43,200 + 185,000 = 346,800
13. FCF = OCF - Change in Current Assets + Change in accounts payable and accruals – change in gross fixed assets.
346,800 – 185,635 + (-49,000) – 193,819 = -81,654
14. Decreased cash flow, bought more assets over the year which uses cash.
15. Yes, a large part of the sales increase was through extending credit which may not all be collected. Provision for bad debts should increase.
16. Macrs for 5 years, 20, 32, 19, 12, 12, and 5. Thus for the 3 year, depreciation is .19 * 10,000 or 1,900. Accumulated depreciation is 20 + 32 + 19 = 71% or .71 * 10,000 = 7,100. Thus, on the balance sheet, the net asset value is only 2,900.
17. A multiplier of 2 means the ROE is double that of the ROA and that for every $1 in equity, $1 is borrowed.