Analysis

Question 1

Economic output=

Answer 1

Gross domestic product(GDP)/gross national product (GNP)

Question 2

Straight line depreciation:

Answer 2

Writes off value of the assets evenly over the assets life.

Question 3

Accelerated depreciation:

Answer 3

Front load deductions, increasing the early year amounts but reducing later year amounts

Question 4

Intangible assets:

Answer 4

Trademarks and goodwill

• company acquires another firm for more than its book value
• excess purchase price over book value is termed “goodwill”
• illiquid

Question 5

Tangible assets

Answer 5

Tangible assets= total assets-intangibles

Assets without intangible assets

Question 6

Retained earnings:

Answer 6

If not all paid out in dividends, the company will have retained earnings.
-earnings belong to the common stockholders equity

Question 7

Bond ratio=

Answer 7

Long term debt/total long term capital

Question 8

Preferred stock ratio

Answer 8

Preferred stock/total long term capital

Question 9

Common stock ratio=

Answer 9

Capital at par + capital in excess of par + retained earnings/total long term capital

Question 10

If company were to liquidate what will the common shareholders receive.

Answer 10

*to see if the stock is overvalued or undervalued:

Book value per common share=
Common equity-intangibles/#of common shares outstanding

Question 11

The funds that would be available to pay off bond holders in a liquidation

Answer 11

Bond holders gave claim over general creditors.

Net tangible asset value per bond=
Tangible assets-current liabilities/number of $1000 par bonds outstanding

Question 12

What increases retained earnings?

Answer 12

Net income

Question 13

What decreases retained earnings?

Answer 13

Dividend distributions

Question 14

Ratios used to measure “profitability” are:

Answer 14

• Operating margin of profit
• times interest earned
• net profile ratio
• return on assets

Question 15

Operating margin of profit=

Answer 15

Operating profit/net sales

*compares operating margin to net sales

Question 16

Bond interest coverage=

Answer 16

Total operating and non-operating income/ bond interest expense

*measures the ability of corporation to meet its bond interest expenses

Question 17

Net profit ratio=

Answer 17

Net income after tax/net sales

*the final profitability of the company after all expenses are deducted

Question 18

Return in assets ratio=

Answer 18

Net income after tax/ total tangible assets

Question 19

Earnings per common share=

Answer 19

Earnings available for common/common shares outstanding

Question 20

Return in common equity=

Answer 20

earnings available for common/common equity

Question 21

Dividend payout ratio:

Answer 21

Common dividends paid\earnings for common

Question 22

Value line:

Answer 22

Follows the 1,700 stocks in its value line investment surgery and produces research reports on each of these
-rating if 1-5, 1 being the best rating

Question 23

Standard and likes corporation

Answer 23

Produces individual research reports on widely held stocks

Question 24

Member firm in house research department

Answer 24

Produce reports on the stocks that they follow, usually rating them as “accumulate”, “hold”, or “sell”

Question 25

Moodys investors services

Answer 25

Primarily a bond rating firm that produces reports on the creditworthiness of issuers *does not provide individual research reports on stocks.

Question 26

Morningstar:

Answer 26

A rating service that rates the performance of mutual funds. - ratings 1-5 (1 being the best) * also rates individual stocks, but minor part of their business

Question 27

Accounting method used for bookkeeping purposes by publicly traded companies? Corporate financial records

Answer 27

Accrual accounting

Question 28

Accrual accounting:

Answer 28

A method that attempts to match revenues and expenses

Question 29

Book value:

Answer 29

The theoretical value of the company that remain if all the assets of the company were liquidated at the values carried on the balance sheet.

Question 30

Net working capital:

Answer 30

Current (liquid) assets - current liabilities

Question 31

Current ratio=

Answer 31

Current assets\current liabilities

Question 32

“Acid test” or “quick” ratio=

Answer 32

Current assets-inventories and prepaid expenses/ current liabilities

Question 33

Defensive interval ratio:

Answer 33

Current assets/ daily operating expenses *find the number of days that a company can continue to run if it were not able to bring in anymore current assets

Question 34

Accounts receivable turnover ratio=

Answer 34

Annual sales/year end accounts receivable

Question 35

Inventory turnover ratio=

Answer 35

Annual cost of sales/year end inventory

Question 36

Ratios that measure a companies liquidity:

Answer 36

Current ratio Acid test ratio Cash assets ratio

Question 37

Method of valuing inventories:

Answer 37

FIFO (more profit) | LIFO (lowest profit)

Question 38

Methods of depreciation:

Answer 38

- Double declining balance - Sum of years digits - Straight line

Question 39

Straight line depreciation:

Answer 39

Method of depreciation. | -for tangible and real assets that pro rates the depreciation deduction EVENLY over the assets life.

Question 40

Double declining balance:

Answer 40

Method of depreciation * accelerated - increase expenses in early years - decrease expenses in later years -for tangible assets such as equipment that, in essence, “doubles up” on the depreciation amounts allowed in early years of an assets life with the deductions reduced proportionately in the later years.

Question 41

Sum of years digits:

Answer 41

Method of depreciation * accelerated - increase reported expenses in early years, - decrease reported expenses in later years -adds up all of the years of an assets depreciable life, and then front loads the depreciation deductions into earlier years and reduces the deviations in later years

Question 42

Components of Total long term capital:

Answer 42

Common at par Capital in excess of par Long term bonded debt Preferred stockholders equity

Question 43

Components of common stockholders equity:

Answer 43

Common at par Capital in excess of par Retained earnings

Question 44

Net tangible asset value per share is the same as?

Answer 44

Book value per share

Question 45

What item would be found on a companies income statement?

Answer 45

Taxes paid All sales made by the company Interest income revenue Sales of fixed assets

Question 46

What info would would be shown on a companies balance sheet?

Answer 46

Retained earnings

Question 47

What info would be shown on a companies statement of retained earnings?

Answer 47

Dividend sales

Question 48

Net income before tax:

Answer 48

Gross sakes