金融學(xué)原理英文后答案

1、CHAPTER 7ANSWERS7-1The four financial statements contained in most annual reports are the balance sheet, income statement, statement of retained earnings, and statement of cash flows.7-2No, because the $20 million of retained earnings probably would not be held as cash. The retained earnings figure

2、represents the reinvestment of earnings by the firm. Consequently, the $20 million would be an investment in all of the assets of the firm.7-3Liquidating assets, borrowing more funds, and issuing stock would constitute sources of funds. Purchasing assets, paying off debt, and stock repurchases would

3、 constitute uses of funds. Thus, the following general rules can be used to determine what changes in balance sheet accounts represent sources and uses of funds:Sources of cash:Uses of Cash: in a liability or equity account in a liability of equity account in an asset account in an asset account7-4T

4、he emphasis of the various types of analysts is by no means uniform nor should it be. Management is interested in all types of ratios for two reasons. First, the ratios point out weaknesses that should be strengthened; second, management recognizes that the other parties are interested in all the ra

5、tios and that financial appearances must be kept up if the firm is to be regarded highly by creditors and equity investors. Equity investors are interested primarily in profitability, but they examine the other ratios to get information on the riskiness of equity commitments. Longterm creditors are

6、more interested in the debt ratio, TIE, and fixed charge coverage ratios, as well as the profitability ratios. Shortterm creditors emphasize liquidity and look most carefully at the liquidity ratios.7-5The most important aspect of ratio analysis is the judgment used when interpreting the results to

7、reach an overall conclusion concerning a firm's financial position. The analyst should be aware of, and include in the interpretation, the fact that: (1) large firms with many different divisions are difficult to categorize in a single industry; (2) financial statements are reported at historica

8、l costs; (3) seasonal factors can distort the ratios; (4) some firms try to "window dress" their financial statements to look good; (5) firms use different accounting procedures to compute inventory values, depreciation, and so on; (6) there might not exist a single value that can be used

9、for comparing firms' ratios (e.g., a current ratio of 2.0 might not be good); and (7) conclusions concerning the overall financial position of a firm should be based on a representative number of ratios, not a single ratio. 7-6Differences in the amounts of assets necessary to generate a dollar o

10、f sales cause asset turnover ratios to vary among industries. For example, a steel company needs a greater number of dollars in assets to produce a dollar in sales than does a grocery store chain such as Safeway. Also, profit margins and turnover ratios might vary due to differences in the amount of

11、 expenses incurred to produce sales. For example, one would expect a grocery store chain like Safeway to spend more per dollar of sales than does a steel company. Often, a large turnover will be associated with a low profit margin, and vice versa.7-7ROE can be writtenTotal assets divided by owners&#

12、39; equity, which is termed the equity multiplier, is a measure of debt utilization; the more debt, the higher the equity multiplier. Thus, using more debt will increase the equity multiplier, resulting in a higher ROE.7-8a.Cash, receivables, and inventories, as well as current liabilities, vary ove

13、r the year for firms with seasonal sales patterns. Therefore, those ratios that examine balance sheet figures will vary unless averages (monthly ones are best) are used.b.Common equity is determined at a point in time, say, December 31, 2002. Profits are earned over time, say, during 2002. If a firm

14、 is growing rapidly, yearend equity will be much larger than beginning-ofyear equity, so the calculated rate of return on equity will be different depending on whether endof-year, beginning-of-year, or average common equity is used as the denominator. Average common equity is conceptually the best f

15、igure to use. In public utility rate cases, people are reported to have deliberately used endofyear or beginningofyear equity to make returns on equity appear excessive or inadequate. Similar problems can arise when a firm is being evaluated.7-9Source(+)20022001or Use(-)?Cash$ 400$ 500+ Accounts rec

16、eivable 250300+ Inventory 450 400- Current assets 1,1001,200Net property & equipment 1,000 950-a Total assets$2,100$2,150Accounts payable$ 200$ 400-Accruals 300250+ Notes payable 400 200+ Current liabilities 900850Long-term debt 800 900-Total liabilities 1,7001,750Common stock 250300- Retained e

17、arnings 150 100+b Total equity 400 400 Total liabilities $2,100$2,150 and equityaThe book value of property & equipment is stated net of depreciation. Because the book value of fixed assets increased, and depreciation is an adjustment that reduces the account balance, Batelan must have purchased

18、 additional fixed assets; but, without more information we cannot determine the amount of the purchase.bThe retained earning balance increased in 2002, so Batelan must have generated a positive net income. But, without additional information (i.e. the amount of net income), we cannot tell whether di

19、vidends were paid in 2002.7-10 Total Effect Current Current on Net Assets Ratio Income a.Cash is acquired through issuance of additional common stock. + + 0 b. Merchandise is sold for cash. + + +(When merchandise is sold, its price is greater than its cost.) c. Federal income tax due for the previou

20、s year is paid. + 0(Both current assets and current liabilities decrease by the same dollar amount. But, because the current ratio is greater than 1.0, it increases as a result of the payment.) d. A fixed asset is sold for less than book value. + + e. A fixed asset is sold for more than book value.

21、+ + + f. Merchandise is sold on credit. + + + g. Payment is made to trade creditors for previous purchases. + 0 h. A cash dividend is declared and paid. 0 i. Cash is obtained through short- term bank loans. + 0 j. Shortterm notes receivable are sold at a discount. k. Marketable securities are sold b

22、elow cost. l. Advances are made to employees. 0 0 0(There is no change in current assets or the current ratio because cash decreases by the same amount prepaid expenses increases.) m. Current operating expenses are paid. n. Shortterm promissory notes are issued to trade creditors in exchange for pas

23、t due accounts payable. 0 0 0 o. Tenyear notes are issued to pay off accounts payable. 0 + 0 p. A fully depreciated asset is retired. 0 0 0 q. Accounts receivable are collected. 0 0 0 r. Equipment is purchased with shortterm notes. 0 0 s. Merchandise is purchased on credit. + 0 t. The estimated taxe

24、s payable are increased. 0 SOLUTIONS7-1a.Dollar amounts are in millions. b.The ratios do not show any particular strengths. However, Argile does have a low inventory turnover, higher than normal days sales outstanding, and poor return on assets. According to its 2001 ratios, it appears Argile has li

25、quidity problems.c. Ratio 2002 2001 TrendCurrent ratio3.6´3.8´WorseDays sales outstanding43.2 days41.1 daysWorseInventory turnover4.4´5.5´WorseFixed assets turnover3.9´4.0´. SameDebt ratio51.1%48.1%WorseProfit margin on sales3.6%4.1%WorseReturn on assets6.3%7.7%WorseThe

26、 above comparison shows that Argile's financial position worsened from 2001 to 2002.d. It would be helpful to know the future plans Argile has with respect to improving its current financial position, introducing new products, liquidating unprofitable investments, and so on. Perhaps the fixed as

27、sets turnover ratio and return on assets figures are low because the firm has expanded its product distribution, and this process has a large cost "up front" with significant payoffs beginning in two or three years. 7-2a.b.For Campsey, ROA = PM ´ TA turnover = 1.7% ´ 1.7 = 2.89%.

28、For the industry, ROA = 1.2% ´ 3.0 = 3.6%.c.Campsey's days sales outstanding is more than twice as long as the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average s

29、o sales should be increased, assets decreased, or both. While Campsey's profit margin is higher than the industry average, its other profitability ratios are low compared to the industrynet income should be higher given the amount of equity and assets. However, the company seems to be in an aver

30、age liquidity position and financial leverage is similar to others in the industry.d.If 2002 represents a period of supernormal growth for Campsey, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look o

31、nly at 2002 ratios will be misled, and a return to normal conditions in 2003 could hurt the firm's stock price.7-3(1)Total liabilities and equity = Total assets = $300,000.(2)Debt = (0.50)(Total assets) = (0.50)($300,000) = $150,000.(3)Accounts payable = Debt Longterm debt = $150,000 $60,000 = $

32、90,000.(4)(5)Sales = (1.5)(Total assets) = (1.5)($300,000) = $450,000.(6)Cost of goods sold = Sales(1 - 0.25) = $450,000(.75) = $337,500(7)Inventory = (CGS)/5 = $337,500/5 = $67,500.(8)Accounts receivable = (Sales/360)(DSO) = ($450,000/360)(36) = $45,000.(9)(Cash + Accounts receivable)/(Accounts pay

33、able) = 0.80´ Cash + Accounts receivable = (0.80)(Accts payable) Cash + $45,000 = (0.80)($90,000) Cash = $72,000 $45,000 = $27,000.(10) Fixed assets = Total assets (Cash + Accts Rec. + Inventories) = $300,000 ($27,000 + $45,000 + $67,500) = $160,500.Balance SheetCash$ 27,000Accounts payable$ 90

34、,000Accounts receivables45,000Long-term debt60,000Inventories67,500Common stock52,500Fixed assets 160,500Retained earnings 97,500Total assets$300,000$300,0007-4 a. b. ROA = Profit margin ´ Total assets turnover Finnerty Industry Comment Profit margin 3.4% 3.0% Good Total assets turnover 1.77

35、80; 3.0´ Poor Return on total assets 6.0% 9.0% Poor c.Analysis of the Du Pont equation and the set of ratios shows that the turnover ratio of sales to assets is quite low. Either sales should be increased at the present level of assets, or the current level of assets should be decreased to be m

36、ore in line with current sales. Thus, the problem appears to be in the balance sheet accounts.d.The comparison of inventory turnover ratios shows that other firms in the industry seem to be getting along with about half as much inventory per unit of sales as Finnerty. If Finnerty's inventory cou

37、ld be reduced this would generate funds that could be used to retire debt, thus reducing interest charges and improving profits, and strengthening the debt position. There might also be some excess investment in fixed assets, perhaps indicative of excess capacity, as shown by a slightly lower than a

38、verage fixed assets turnover ratio. However, this is not nearly as clearcut as the over-investment in inventory.e.If Finnerty had a sharp seasonal sales pattern, or if it grew rapidly during the year, many ratios might be distorted. Ratios involving cash, receivables, inventories, and current liabil

39、ities, as well as those based on sales, profits, and common equity, could be biased. It is possible to correct for such problems by using average rather than endofperiod figures.7-5a.Here are Cary's base case ratios and other data as compared to the industry: Cary Industry Comment Quick 0.85

40、0; 1.0´ Weak Current 2.33H 2.7´ Weak Inventory turnover 4.00´ 5.8´ Poor Days sales outstanding 37 days 32 days Poor Fixed assets turnover 10.0´ 13.0´ Poor Total assets turnover 2.34´ 2.6´ Poor Return on assets 5.9% 9.1% Bad Return on equity 13.07% 18.2% Bad De

41、bt ratio 54.8% 50.0% High Profit margin on sales 2.5% 3.5% Bad EPS $4.71 n.a. Stock Price $23.57 n.a. P/E ratio 5.0´ 6.0´ Poor M/B ratio 0.65 n.a. Cary appears to be badly managedall of its ratios are worse than the industry averages, and the result is low earnings, a low P/E, a low stock

42、price, and a low M/B ratio. The company needs to do something to improve.b.A decrease in the inventory level would improve the inventory turnover, total assets turnover, and ROA, all of which are too low. It would have some impact on the current ratio, but it is difficult to say precisely how that r

43、atio would be affected. If the lower inventory level allowed Cary to reduce its current liabilities, then the current ratio would improve. The lower cost of goods sold would improve all of the profitability ratios and, if dividends were not increased, would lower the debt ratio through increased ret

44、ained earnings. All of this should lead to a higher market/book ratio and a higher stock price.7-6We are given ROA = 3% and Sales/Total assets = 1.5´.From Du Pont equation: ROA = Profit margin ´ Total assets turnover 3% = Profit margin (1.5) Profit margin = 3%/1.5 = 2%.We can also calculat

45、e Zumwalt's debt ratio in a similar manner, given the facts of the problem. We are given ROA, which is NI/A and ROE, which is NI/Equity; if we use the reciprocal of ROE we have the following equation:Debt/Assets = 1 - Equity/A = 1 - 0.60 = 0.40 = 40.0%Thus, Zumwalt's net profit margin = 2% a

46、nd its debt ratio = 40%.7-7 Present current ratio = $1,312,500/$525,000 = 2.5H $1,312,500 + NP = $1,050,000 + 2NP NP = $262,500.Shortterm debt can increase by a maximum of $262,500 without violating a 2-to-1 current ratio, assuming that the entire increase in notes payable is used to increase curren

47、t assets. Because we assumed that the additional funds would be used to increase inventory, the inventory account will increase to $637,500, and current assets will total $1,575,000. Quick ratio = ($1,575,000 $637,500)/$787,500 = $937,500/$787,500 = 1.19´7-8 (1) Current liabilities = $270,000.(

48、2) Inventories= $432,000. (3) Current assets = Cash & Marketable securities + Accounts receivable + Inventories $810,000 = $120,000 + Accounts receivable + $432,000 Accounts receivable = $258,000.(4) CGS = $2,160,000.(5) CGS = 0.86 (Sales) (6)7-9TIE = EBIT/INT, so find EBIT and INT.Interest = $5

49、00,000 ´ 0.1 = $50,000.Net income = $2,000,000 ´ 0.05 = $100,000.Taxable income (EBT) = $100,000/(1 - T) = $100,000/0.8 = $125,000.EBIT = $125,000 + $50,000 = $175,000.TIE = $175,000/$50,000 = 3.5´.7-10ROE = NI/EquityNow we need to determine the inputs for the equation from the data that were given. On the left we set up an income statement, and we put numbers in it on the right: Sales (given) $10,000 - Cost na EBIT (given) $ 1,000 - INT (