Question: Polly Esther Dress Shops Inc. can open

> Firms in Japan often employ both high operating and financial leverage because of the use of modern technology and close borrower–lender relationships. Assume the Mitaka Company has a sales volume of 130,000 units at a price of $30 per unit; variable cos

> Sterling Optical and Royal Optical both make glass frames and each is able to generate earnings before interest and taxes of $132,000. The separate capital structures for Sterling and Royal are shown here: a. Compute earnings per share for both firms.

> The capital structure for Cain Supplies is presented next. Compute the stock price for Cain if it sells at 19 times earnings per share and EBIT is $50,000. The tax rate is 20 percent.

> Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The separate capital structures for Lenow and Hall are presented next. a. Compute earnings per share if earnin

> U.S. Steal has the following income statement data: a. Compute DOL based on the following formula: b. Confirm that your answer to part a is correct by re computing DOL using Formula 5–3. There may be a slight difference due to roundi

> International Data System’s information on revenue and costs is relevant only up to a sales volume of 105,000 units. After 105,000 units, the market becomes saturated and the price per unit falls from $14.00 to $8.80. Also, there are cost overruns at a p

> United Snack Company sells 50-pound bags of peanuts to university dormitories for $20 a bag. The fixed costs of this operation are $176,250, while the variable costs of peanuts are $.15 per pound. a. What is the break-even point in bags? b. Calculate th

> Why is the cumulative feature of preferred stock particularly important to preferred stockholders?

> Healthy Foods Inc. sells 50-pound bags of grapes to the military for $10 a bag. The fixed costs of this operation are $80,000, while the variable costs of grapes are $0.10 per pound. a. What is the break-even point in bags? b. Calculate the profit or los

> The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows: Given this income statement, compute the following: a. Degree of operating leverage. b. Degree of financial leverage. c. Degree of combine

> The Sterling Tire Company’s income statement for 20X1 is as follows: Given this income statement, compute the following: a. Degree of operating leverage. b. Degree of financial leverage. c. Degree of combined leverage. d. Break-even p

> Shock Electronics sells portable heaters for $35 per unit, and the variable cost to produce them is $22. Mr. Amps estimates that the fixed costs are $97,500. a. Compute the break-even point in units. b. Fill in the following table (in dollars) to illustr

> Vitale Hair Spray had sales of 13,000 units in March. A 70 percent increase is expected in April. The company will maintain 30 percent of expected unit sales for April in ending inventory. Beginning inventory for April was 650 units. How many units shoul

> Sales for Ross Pro’s Sports Equipment are expected to be 4,800 units for the coming month. The company likes to maintain 10 percent of unit sales for each month in ending inventory. Beginning inventory is 300 units. How many units should the firm produce

> Dodge Ball Bearings had sales of 15,000 units at $45 per unit last year. The marketing manager projects a 30 percent increase in unit volume sales this year with a 20 percent price decrease (due to a price reduction by a competitor). Returned merchandise

> Cyber Security Systems had sales of 3,500 units at $75 per unit last year. The marketing manager projects a 30 percent increase in unit volume sales this year with a 40 percent price increase. Returned merchandise will represent 8 percent of total sales.

> Bronco Truck Parts expects to sell the following number of units at the prices indicated under three different scenarios in the economy. The probability of each outcome is indicated. What is the expected value of the total sales projection?

> The Alliance Corp. expects to sell the following number of units of copper cables at the prices indicated, under three different scenarios in the economy. The probability of each outcome is indicated. What is the expected value of the total sales project

> Discuss the relationship between bond prices and interest rates. What impact do changing interest rates have on the price of long-term bonds versus short-term bonds?

> Gale house Gas Stations Inc. expects sales to increase from $1,550,000 to $1,750,000 next year. Gale house believes that net assets (Assets  Liabilities) will represent 50 percent of sales. His firm has an 8 percent return on sales and pays 45 percent o

> Conn Man’s Shops, a national clothing chain, had sales of $350 million last year. The business has a steady net profit margin of 9 percent and a dividend payout ratio of 25 percent. The balance sheet for the end of last year is shown ne

> The Manning Company has financial statements as shown next, which are representative of the company’s historical average. The firm is expecting a 35 percent increase in sales next year, and management is concerned about the company&acir

> Owen’s Electronics has nine operating plants in seven Southwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in t

> Archer Electronics Company’s actual sales and purchases for April and May are shown here, along with forecast sales and purchases for June through September. The company makes 20 percent of its sales for cash and 80 percent on credit.

> Harry’s Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial pl

> Graham Potato Company has projected sales of $6,000 in September, $10,000 in October, $16,000 in November, and $12,000 in December. Of the company’s sales, 20 percent are paid for by cash and 80 percent are sold on credit. Experience shows that 40 percen

> The Volt Battery Company has forecast its sales in units as follows: Volt Battery always keeps an ending inventory equal to 110 percent of the next month’s expected sales. The ending inventory for December (January’s

> Wright Lighting Fixtures forecasts its sales in units for the next four months as follows: Wright maintains an ending inventory for each month in the amount of one and one-half times the expected sales in the following month. The ending inventory for F

> The Denver Corporation has forecast the following sales for the first seven months of the year: Monthly material purchases are set equal to 40 percent of forecast sales for the next month. Of the total material costs, 50 percent are paid in the month o

> Under what circumstances would a call on a bond be exercised by a corporation? What is the purpose of a deferred call?

> Ultra vision Inc. anticipates sales of $290,000 from January through April. Materials will represent 50 percent of sales, and because of level production, material purchases will be equal for each month during the four months of January, February, March,

> Philip Morris expects the sales for his clothing company to be $550,000 next year. Philip notes that net assets (Assets – Liabilities) will remain unchanged. His clothing firm will enjoy a 12 percent return on total sales. He will start the year with $15

> Watt’s Lighting Stores made the following sales projection for the next six months. All sales are credit sales. Sales in January and February were $38,000 and $37,000, respectively. Experience has shown that of total sales, 10 percent

> Simpson Glove Company has made the following sales projections for the next six months. All sales are credit sales. Sales in January and February were $41,000 and $39,000, respectively. Experience has shown that of total sales receipts 10 percent are un

> J. Lo’s Clothiers has forecast credit sales for the fourth quarter of the year as: Experience has shown that 30 percent of sales are collected in the month of sale, 60 percent in the following month, and 10 percent are never collected

> Sprint Shoes Inc. had a beginning inventory of 9,250 units on January 1, 20X1. Costs associated with the inventory: During 20X1, the firm produced 43,000 units with the following costs: Sales for the year were 47,350 units at $44.60 each. Sprint Shoe

> The Bradley Corporation produces a product with the following costs as of July 1, 20X1: Beginning inventory at these costs on July 1 was 3,250 units. From July 1 to December 1, 20X1, Bradley produced 12,500 units. These units had a material cost of $5,

> Convex Mechanical Supplies produces a product with the following costs as of July 1, 20X1: Beginning inventory at these costs on July 1 was 5,000 units. From July 1 to December 1, Convex produced 15,000 units. These units had a material cost of $10 per

> At the end of January, Mineral Labs had an inventory of 775 units, which cost $12 per unit to produce. During February, the company produced 900 units at a cost of $16 per unit. If the firm sold 1,500 units in February, what was the cost of goods sold? a

> At the end of January, Higgins Data Systems had an inventory of 650 units, which cost $16 per unit to produce. During February, the company produced 950 units at a cost of $19 per unit. If the firm sold 1,150 units in February, what was its cost of goods

> What is the difference between a bond agreement and a bond indenture?

> On December 31 of last year, Wolfson Corporation had an inventory of 450 units of its product, which cost $22 per unit to produce. During January, the company produced 850 units at a cost of $25 per unit. Assuming that Wolfson Corporation sold 800 units

> Delsing Plumbing Company has beginning inventory of 16,500 units, will sell 55,000 units for the month, and desires to reduce ending inventory to 25 percent of beginning inventory. How many units should Delsing produce?

> Eli Lilly is very excited because sales for his nursery and plant company are expected to double from $600,000 to $1,200,000 next year. Eli notes that net assets (Assets — Liabilities) will remain at 50 percent of sales. His firm will enjoy an 8 percent

> Network Communications has total assets of $1,500,000 and current assets of $612,000. It turns over its fixed assets three times a year. It has $319,000 of debt. Its return on sales is 8 percent. What is its return on stockholders’ equity?

> Easter Egg and Poultry Company has $2,000,000 in assets and $1,400,000 of debt. It reports net income of $200,000. a. What is the firm’s return on assets? b. What is its return on stockholders’ equity? c. If the firm has an asset turnover ratio of 2.5 ti

> The Haines Corp. shows the following financial data for 20X1 and 20X2. For each year, compute the following and indicate whether it is increasing or decreasing profitability in 20X2 as indicated by the ratio. a. Cost of goods sold to sales. b. Selling

> Dr. Zhivàgo Diagnostics Corp. income statements for 20X1 are as follows: a. Compute the profit margin for 20X1. b. Assume that in 20X2, sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep a

> Billy’s Crystal Stores Inc. has assets of $5,960,000 and turns over its assets 1.9 times per year. Return on assets is 8 percent. What is the firm’s profit margin (return on sales)?

> Quantum Moving Company has the following data. Industry information also is shown. As an industry analyst comparing the firm to the industry, are you likely to praise or criticize the firm in terms of the following: a. Net income/Total assets. b. Debt/

> Discuss the advantages and disadvantages of debt.

> Jolie Foster Care Homes Inc. shows the following data: a. Compute the ratio of net income to total assets for each year and comment on the trend. b. Compute the ratio of net income to stockholders’ equity and comment on the trend. Exp

> In January 2007, the Status Quo Company was formed. Total assets were $544,000, of which $306,000 consisted of depreciable fixed assets. Status Quo uses straight-line depreciation of $30,600 per year, and in 2007 it estimated its fixed assets to have use

> A firm has net income before interest and taxes of $193,000 and interest expense of $28,100. a. What is the times-interest-earned ratio? b. If the firm’s lease payments are $48,500, what is the fixed charge coverage?

> Using the income statement for Times Mirror and Glass Co., compute the following ratios: a. The interest coverage. b. The fixed charge coverage. The total assets for this company equal $80,000. Set up the equation for the Du Pont system of ratio analysis

> The Lancaster Corporation’s income statement is given next. a. What is the times-interest-earned ratio? b. What would be the fixed-charge-coverage ratio?

> The balance sheet for Stud Clothiers is shown next. Sales for the year were $2,400,000, with 90 percent of sales sold on credit. Compute the following ratios: a. Current ratio. b. Quick ratio. c. Debt-to-total-assets ratio. d. Asset turnover. e. Averag

> Jim Short’s Company makes clothing for schools. Sales in 20X1 were $4,820,000. Assets were as follows: a. Compute the following: 1. Accounts receivable turnover. 2. Inventory turnover. 3. Fixed asset turnover. 4. Total asset turnover.

> Perez Corporation has the following financial data for the years 20X1 and 20X2: a. Compute inventory turnover based on ratio number 6, Sales/Inventory, for each year. b. Compute inventory turnover based on an alternative calculation that is used by man

> Database Systems is considering expansion into a new product line. Assets to support expansion will cost $380,000. It is estimated that Database can generate $1,410,000 in annual sales, with an 8 percent profit margin. What would net income and return on

> Martin Electronics has an accounts receivable turnover equal to 15 times. If accounts receivable are equal to $80,000, what is the value for average daily credit sales?

> Explain how the zero-coupon rate bond provides a return to the investor. What are the advantages to the corporation?

> A firm has sales of $3 million, and 10 percent of the sales are for cash. The year-end accounts receivable balance is $285,000. What is the average collection period? (Use a 360-day year.)

> Assume the following data for Cable Corporation and Multi-Media Inc. a. Compute the return on stockholders’ equity for both firms using ratio 3a. Which firm has the higher return? b. Compute the following additional ratios for both fi

> Jerry Rice and Grain Stores has $4,780,000 in yearly sales. The firm earns 4.5 percent on each dollar of sales and turns over its assets 2.7 times per year. It has $123,000 in current liabilities and $349,000 in long-term liabilities. a. What is its retu

> Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation: a. Butters Corporation has a profit margin of 7 percent and its return on assets (investment) is 25.2 percent. What is its assets turnover? b. If t

> Gates Appliances has a return-on-assets (investment) ratio of 8 percent. a. If the debt-to-total-assets ratio is 40 percent, what is the return on equity? b. If the firm had no debt, what would the return-on-equity ratio be?

> All State Trucking Co. has the following ratios compared to its industry for last year. Explain why the return-on-assets ratio is so much more favorable than the return-on-sales ratio compared to the industry. No numbers are necessary; a one-sentence a

> Baker Oats had an asset turnover of 1.6 times per year. a. If the return on total assets (investment) was 11.2 percent, what was Baker’s profit margin? b. The following year, on the same level of assets, Baker’s assets turnover declined to 1.4 times and

> Fondren Machine Tools has total assets of $3,310,000 and current assets of $879,000. It turns over its fixed assets 3.6 times per year. Its return on sales is 4.8 percent. It has $1,750,000 of debt. What is its return on stockholders’ equity?

> Given the financial statements for Jones Corporation and Smith Corporation shown here: a. To which one would you, as credit manager for a supplier, approve the extension of (short-term) trade credit? Why? Compute all ratios before answering. b. In which

> Using the financial statements for the Snider Corporation, calculate the 13 basic ratios found in the chapter.

> Explain how the bond refunding problem is similar to a capital budgeting decision.

> How does the SML react to changes in the rate of interest, changes in the rate of inflation, and changing investor expectations?

> The following information is from Harrelson Inc.’s, financial statements. Sales (all credit) were $28.50 million for last year. Fill in the balance sheet:

> We are given the following information for the Pettit Corporation. Current assets are composed of cash, marketable securities, accounts receivable, and inventory. Calculate the following balance sheet items. a. Accounts receivable. b. Marketable securi

> The Griggs Corporation has credit sales of $1,200,000. Given these ratios, fill in the following balance sheet.

> Construct the current assets section of the balance sheet from the following data. (Use cash as a plug figure after computing the other values.)

> The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting. a. Assume in 20X2 that the same 17,600-unit volume is maintained, but that the sales price increases by 10 percent. Because of FIFO inventory policy,

> Omni Technology Holding Company has the following three affiliates: a. Which affiliate has the highest return on sales? b. Which affiliate has the lowest return on assets? c. Which affiliate has the highest total asset turnover? d. Which affiliate has

> The Global Products Corporation has three subsidiaries. a. Which division has the lowest return on sales? b. Which division has the highest return on assets? c. Compute the return on assets for the entire corporation. d. If the $8,760,000 investment in

> Refer to the following financial statements for Crosby Corporation: a) Prepare a statement of cash flows for the Crosby Corporation using the general procedures indicated in Table 2–10. b) Describe the general relationship between net i

> For December 31, 20X1, the balance sheet of Baxter Corporation was as follows: Sales for 20X2 were $245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was $24,500. Depreciation expense was 8 percent of plant

> Vriend Software Inc.’s book value per share is $15.20. Earnings per share is $1.88, and the firm’s stock trades in the stock market at 3.5 times book value per share, what will the P/E ratio be? (Round to the nearest whole number.)

> Bonds of different risk classes will have a spread between their interest rates. Is this spread always the same? Why?

> Amigo Software Inc. has total assets of $889,000, current liabilities of $192,000, and long-term liabilities of $154,000. There is $87,000 in preferred stock outstanding. Thirty thousand shares of common stock have been issued. a. Compute book value (ne

> The Holtzman Corporation has assets of $400,000, current liabilities of $50,000, and long-term liabilities of $100,000. There is $40,000 in preferred stock outstanding; 20,000 shares of common stock have been issued. a. Compute book value (net worth) per

> Landers Nursery and Garden Stores has current assets of $220,000 and fixed assets of $170,000. Current liabilities are $80,000 and long-term liabilities are $140,000. There is $40,000 in preferred stock outstanding and the firm has issued 25,000 shares o

> Nova Electrics anticipates cash flow from operating activities of $6 million in 20X1. It will need to spend $1.2 million on capital investments to remain competitive within the industry. Common stock dividends are projected at $.4 million and preferred s

> The Rogers Corporation has a gross profit of $880,000 and $360,000 in depreciation expense. The Evans Corporation also has $880,000 in gross profit, with $60,000 in depreciation expense. Selling and administrative expense is $120,000 for each company. Gi

> Identify whether each of the following items increases or decreases cash flow: Increase in accounts receivable…………….Decrease in prepaid expenses Increase in notes payable…………………………….……Increase in inventory Depreciation expense……………………………………….….Dividend

> Stilley Corporation had earnings after taxes of $436,000 in 20X2 with 200,000 shares outstanding. The stock price was $42.00. In 20X3, earnings after taxes declined to $206,000 with the same 200,000 shares outstanding. The stock price declined to $27.80.

> Botox Facial Care had earnings after taxes of $370,000 in 20X1 with 200,000 shares of stock outstanding. The stock price was $31.50. In 20X2, earnings after taxes increased to $436,000 with the same 200,000 shares outstanding. The stock price was $42.00.

> Quantum Technology had $669,000 of retained earnings on December 31, 20X2. The company paid common dividends of $35,500 in 20X2 and had retained earnings of $576,000 on December 31, 20X1. How much did Quantum Technology earn during 20X2, and what would e

> Elite Trailer Parks has an operating profit or $200,000. Interest expense for the year was $10,000; preferred dividends paid were $18,750; and common dividends paid were $30,000. The tax was $61,250. The firm has 20,000 shares of common stock outstanding

> What is the difference between the following yields: coupon rate, current yield, and yield to maturity?

> Arrange the following items in proper balance sheet presentation:

> Fill in the blank spaces with categories 1 through 7: 1. Balance sheet (BS) 2. Income statement (IS) 3. Current assets (CA) 4. Fixed assets (FA) 5. Current liabilities (CL) 6. Long-term liabilities (LL) 7. Stockholders’ equity (SE)

> Low Carb Diet Supplement Inc. has two divisions. Division A has a profit of $156,000 on sales of $2,010,000. Division B is able to make only $28,800 on sales of $329,000. Based on the profit margins (returns on sales), which division is superior?

> Lemon Auto Wholesalers had sales of $1,000,000 last year and cost of goods sold represented 78 percent of sales. Selling and administrative expenses were 12 percent of sales. Depreciation expense was $11,000 and interest expense for the year was $8,000.