FINC 331 FINC331 Homework 2 Solution (UMUC)

FINC 331 FINC331 Homework 2 Solution (UMUC)


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FINC 331 Homework 2

  1. Which of the following is a correct statement regarding a method of drafting a company's income statement?
  2. Which of the following is NOT a correct definition of a basic type of financial ratios?
  3. During a fiscal year, a company has $20,000,000 in revenue. Its operating expenses are $17,000,000. What is the company's operating margin?
  4. During a fiscal year, a company had $25,000,000 in total sales. It had a cost of goods sold (COGS) of $18,000,000 and $4,000,000 in additional expenses. What is the company's gross profit margin?
  5. A company had $5,000,000 in total revenues for its fiscal year. Its expenses for the year were $3,500,000. Its total assets were $12,500,000. What is the company's return on assets for the fiscal year?
  6. A company has assets of $2,000,000, net sales of $3,000,000, and $1,500,000 in equity. Its net income is $10,000,000. What is its return on equity?
  7. A business begins its fiscal year with an inventory balance of $1,000,000. During that year its cost of goods sold is $3,500,000. Its inventory balance at the end of the year is $500,000. What is its inventory turnover for the year?
  8. A business has $1,250,000 in accounts receivable. Its annual sales for the fiscal year is $30,000,000. What is its days sales outstanding ratio?
  9. At the beginning of a fiscal year, a company has $1,000,000 in fixed assets. During that year, it makes $8,000,000 in net sales. At the end of the fiscal year it has $1,500,000 in fixed assets. What is its fixed-asset turnover ratio?:
  10. A company has $100,00 in cash, $300,000 in accounts receivable, $50,000 in inventory and a $300,000 office building. Its current liabilities are $250,000. What is the company's current ratio, and does that ratio good short-term financial strength?
  11. Which of the following statements about the total debt to total assets ratio is NOT true?
  12. Suppose that a public corporation has $100 million net income. If its P/E ratio is 3.5 and it has 1 million shares outstanding, what is the value of stock price?
  13. Suppose that a public corporation has a total market value (according to its stock price and number of shares outstanding) of $500 million. If its current net income is $10 per share and it has 1 million shares outstanding, what is the value of its P/E ratio?
  14. A company has $1 million in sales last year, $1.5 million in sales this year, and projected net income of $250,000. It has $5 million of its assets tied to sales, $3 million in sale affected liabilities, and a retention ratio of 0.3. What is its AFN?
  15. Which of the following is the correct order of steps when performing a forecast related to a company's performance?
  16. Which of the following statements correctly defines a component of Cost of Goods Sold?
  17. profit. It will have fixed costs of $3 million. Each unit of its product sells for $20. How much contribution per unit must the company have to meet its goals?
  18. A company is considering merging with another business. It is planning on preparing a pro forma income statement. Which of the following should be included in the pro forma statement?
  19. Which of the following statements regarding pro forma financial statements is correct?
  20. A company wants to increase the amount of time in its disbursement cycle. Which of the following is a valid way to do that?

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