Questions from Financial Management

Q: Profit margins and turnover ratios vary from one industry to another.

Profit margins and turnover ratios vary from one industry to another. What differences would you expect to find between the turnover ratios, profit margins, and DuPont equations for a grocery chain an...

Q: How does inflation distort ratio analysis comparisons for one company over time

How does inflation distort ratio analysis comparisons for one company over time (trend analysis) and for different companies that are being compared? Are only balance sheet items or both balance sheet...

Q: How does a cost-efficient capital market help reduce the prices

How does a cost-efficient capital market help reduce the prices of goods and services?

Q: If a firm’s ROE is low and management wants to improve it

If a firm’s ROE is low and management wants to improve it, explain how using more debt might help.

Q: Is it better for a firm’s actual stock price in the market

Is it better for a firm’s actual stock price in the market to be under, over, or equal to its intrinsic value? Would your answer be the same from the standpoints of stockholders in general and a CEO w...

Q: Give some examples that illustrate how (a) Seasonal factors

Give some examples that illustrate how (a) Seasonal factors and (b) Different growth rates might distort a comparative ratio analysis. How might these problems be alleviated?

Q: Why is it sometimes misleading to compare a company’s financial ratios with

Why is it sometimes misleading to compare a company’s financial ratios with those of other firms that operate in the same industry?

Q: Suppose you were comparing a discount merchandiser with a high-end

Suppose you were comparing a discount merchandiser with a high-end merchandiser. Suppose further that both companies had identical ROEs. If you applied the DuPont equation to both firms, would you exp...

Q: Indicate the effects of the transactions listed in the following table on

Indicate the effects of the transactions listed in the following table on total current assets, current ratio, and net income. Use (+) to indicate an increase, (−) to indicate a decr...

Q: Financial ratio analysis is conducted by three main groups of analysts:

Financial ratio analysis is conducted by three main groups of analysts: credit analysts, stock analysts, and managers. What is the primary emphasis of each group, and how would that emphasis affect th...