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financial reporting financial statement analysis and valuation
International Financial Statement Analysis CFA Institute Investment Series 1st Edition Thomas R. Robinson, Hennie Van Greuning CFA, Elaine Henry, Michael A. Broihahn, Sir David Tweedie - Solutions
On 1 January 2011, Parker Company acquired 30% of Prince Inc. common shares for the cash price of €500,000 (both companies are fictitious). It is determined that Parker has the ability to exert significant influence on Prince’s financial and operating decisions. The following information
In 2010, Cinnamon’s net profit margin would be highest if:A. it is deemed to have control of Cambridge.B. it had not increased its stake in Cambridge.C. it is deemed to have significant influence over Cambridge.Cinnamon, Inc. is a diversified manufacturing company headquartered in the United
On 1 January 2011, Wicker Company acquired a 25% interest in Foxworth Company (both companies are fictitious) for €1,000,000 and used the equity method to account for its investment. The book value of Foxworth’s net assets on that date was €3,800,000.An analysis of fair values revealed that
In 2009, Zimt’s earnings before taxes includes a contribution (in € millions) from its investment in Oxbow Limited closest to:A. (€0.6) million.B. (€1.0) million.C. €2.0 million.Zimt, AG is a consumer products manufacturer headquartered in Austria. It complies with IFRS. In 2009, Zimt
At 31 December 2010, assuming control and recognition of goodwill, Cinnamon’s reported debt to equity ratio will most likely be highest if it accounts for its investment in Cambridge using the:A. equity method.B. full goodwill method.C. partial goodwill method.Cinnamon, Inc. is a diversified
Compared to Cinnamon’s operating margin in 2009, if it is deemed to have control of Cambridge, its operating margin in 2010 will most likely be:A. lower.B. higher.C. the same.Cinnamon, Inc. is a diversified manufacturing company headquartered in the United Kingdom. It complies with IFRS. In 2009,
Jones Company owns 25% of Jason Company (both fictitious companies) and appropriately applies the equity method of accounting. Amortization of excess purchase price, related to undervalued assets at the time of the investment, is €8,000 per year. During 2011 Jones sold €96,000 of inventory to
Franklin Company, headquartered in France, acquired 100% of the outstanding shares of Jeff erson, Inc. by issuing 1,000,000 shares of its €1 par common stock (€15 market value). Immediately before the transaction, the two companies compiled the following information:Jefferson has no
At 31 December 2010, Zimt’s total assets balance would most likely be:A. highest if Zimt is deemed to have control of Oxbow.B. highest if Zimt is deemed to have significant influence over Oxbow.C. unaffected by the accounting method used for the investment in Oxbow.Zimt, AG is a consumer products
On 1 January 2012, the hypothetical Parent Co. acquired 90% of the outstanding shares of the hypothetical Subsidiary Co. in exchange for shares of Parent Co.’s no par common stock with a fair value of €180,000. The fair market value of the subsidiary’s shares on the date of the exchange was
Based on Gelblum’s estimates, if Zimt is deemed to have significant influence over Oxbow, its 2010 net income (in € millions) would be closest to:A. €75.B. €109.C. €143.Zimt, AG is a consumer products manufacturer headquartered in Austria. It complies with IFRS. In 2009, Zimt held a 10
The cash-generating unit of a French company has a carrying value of €1,400,000, which includes €300,000 of allocated goodwill. The recoverable amount of the cash-generating unit is determined to be €1,300,000, and the estimated fair value of its identifiable net assets is €1,200,000.
Based on Gelblum’s estimates, if Zimt is deemed to have joint control of Oxbow, and Zimt uses the proportionate consolidation method, its 31 December 2010 total liabilities (in € millions) will most likely be closest to:A. €686.B. €975.C. €1,263.Zimt, AG is a consumer products
Based on Gelblum’s estimates, if Zimt is deemed to have control over Oxbow, its 2010 consolidated sales (in € millions) will be closest to:A. €1,700.B. €2,375.C. €3,050.Zimt, AG is a consumer products manufacturer headquartered in Austria. It complies with IFRS. In 2009, Zimt held a 10
A reporting unit of a US corporation (e.g., a division) has a fair value of $1,300,000 and a carrying value of $1,400,000 that includes recorded goodwill of $300,000. Th e estimated fair value of the identifiable net assets of the reporting unit at the impairment test date is $1,200,000. Calculate
Based on Gelblum’s estimates, Zimt’s net income in 2010 will most likely be:A. highest if Zimt is deemed to have control of Oxbow.B. highest if Zimt is deemed to have significant influence over Oxbow.C. independent of the accounting method used for the investment in Oxbow.Zimt, AG is a consumer
The balance sheet carrying value of Confabulated’s investment portfolio (in € thousands) at 31 December 2009 is closest to:A. 112,000.B. 115,000.C. 118,000.Burton Howard, CFA, is an equity analyst with Maplewood Securities. Howard is preparing a research report on Confabulated Materials, SA, a
The balance sheet carrying value of Confabulated’s investment portfolio at 31 December 2009 would have been higher if which of the securities had been reclassified as a held for trading security?A. Bugle.B. Cathay.C. Dumas.Burton Howard, CFA, is an equity analyst with Maplewood Securities. Howard
Compared to Confabulated’s reported interest income in 2009, if Dumas had been classified as available-for-sale, the interest income would have been:A. lower.B. the same.C. higher.Burton Howard, CFA, is an equity analyst with Maplewood Securities. Howard is preparing a research report on
Compared to Confabulated’s reported earnings before taxes in 2009, if Bugle had been classified as a held for trading security, the earnings before taxes (in € thousands) would have been:A. the same.B. €1,000 lower.C. €3,000 higher.Burton Howard, CFA, is an equity analyst with Maplewood
Confabulated’s reported interest income would be lower if the cost was the same but the par value (in € thousands) of:A. Bugle was €28,000.B. Cathay was €37,000.C. Dumas was €55,000.Burton Howard, CFA, is an equity analyst with Maplewood Securities. Howard is preparing a research report
Confabulated’s special purpose entity is most likely to be:A. held off -balance sheet.B. consolidated on Confabulated’s financial statements.C. consolidated on Confabulated’s financial statements only if it is a “qualifying SPE.”Burton Howard, CFA, is an equity analyst with Maplewood
Compared to accounting principles currently in use, the pooling method BetterCare used for its Statewide Medical acquisition has most likely caused its reported:A. revenue to be higher.B. total equity to be lower.C. total assets to be higher.BetterCare Hospitals, Inc. operates a chain of hospitals
Based on Ohalin’s estimates, the amount of joint venture revenue (in $ millions) included on BetterCare’s consolidated 2010 financial statements should be closest to:A. $0.B. $715.C. $1,430.BetterCare Hospitals, Inc. operates a chain of hospitals throughout the United States. The company has
Based on Ohalin’s estimates, the amount of joint venture net income included on the consolidated financial statements of each venturer will most likely be:A. higher for BetterCare.B. higher for Supreme Healthcare.C. the same for both BetterCare and Supreme Healthcare.BetterCare Hospitals, Inc.
Based on Ohalin’s estimates, the amount of the joint venture’s 31 December 2010 total assets (in $ millions) that will be included on Supreme Healthcare’s consolidated financial statements will be closest to:A. $0.B. $750.C. $1,500.BetterCare Hospitals, Inc. operates a chain of hospitals
Based on Ohalin’s estimates, the amount of joint venture shareholders’ equity at 31 December 2010 included on the consolidated financial statements of each venturer will most likely be:A. higher for BetterCare.B. higher for Supreme Healthcare.C. the same for both BetterCare and Supreme
If Supreme Healthcare sells its receivables to the SPE, its consolidated financial results will most likely show:A. a higher revenue for 2010.B. the same cash balance at 31 December 2010.C. the same accounts receivable balance at 31 December 2010.BetterCare Hospitals, Inc. operates a chain of
NinMount’s current ratio on 31 December 2008 most likely will be highest if the results of the acquisition are reported using:A. the equity method.B. consolidation with full goodwill.C. consolidation with partial goodwill.Percy Byron, CFA, is an equity analyst with a UK-based investment firm. One
NinMount’s long-term debt to equity ratio on 31 December 2008 most likely will be lowest if the results of the acquisition are reported using:A. the equity method.B. consolidation with full goodwill.C. consolidation with partial goodwill.Percy Byron, CFA, is an equity analyst with a UK-based
Based on Byron’s forecast, if NinMount deems it has acquired control of Boswell, Nin-Mount’s consolidated 2009 depreciation and amortization expense (in £ millions) will be closest to:A. 102.B. 148.C. 204.Percy Byron, CFA, is an equity analyst with a UK-based investment firm. One firm Byron
Based on Byron’s forecast, NinMount’s net profit margin for 2009 most likely will be highest if the results of the acquisition are reported using:A. the equity method.B. consolidation with full goodwill.C. consolidation with partial goodwill.Percy Byron, CFA, is an equity analyst with a
Based on Byron’s forecast, NinMount’s 2009 return on beginning equity most likely will be the same under:A. either of the consolidations, but different under the equity method.B. the equity method, consolidation with full goodwill, and consolidation with partial goodwill.C. none of the equity
Based on Byron’s forecast, NinMount’s 2009 total asset turnover ratio on beginning assets under the equity method is most likely :A. lower than if the results are reported using consolidation.B. the same as if the results are reported using consolidation.C. higher than if the results are
FinnCo purchases goods from its Mexican supplier on 1 November 20X1; the purchase price is 100,000 Mexican pesos. Credit terms allow payment in 45 days, and FinnCo makes payment of 100,000 pesos on 15 December 20X1. FinnCo’s functional and presentation currency is the euro. Spot exchange rates
If Ukraine’s economy becomes highly inflationary, Eurexim will most likely translate inventory by:A. restating for inflation and using the temporal method.B. restating for inflation and using the current exchange rate.C. using the temporal method with no restatement for inflation.Pedro Ruiz is an
Given Ruiz’s belief about the direction of exchange rates, Eurexim’s gross profit margin would be highest if it accounts for the Ukraine subsidiary’s inventory using:A. FIFO and the temporal method.B. FIFO and the current rate method.C. weighted-average cost and the temporal method.Pedro Ruiz
FinnCo sells goods to a customer in the United Kingdom for £10,000 on 15 November 20X1, with payment to be received in British pounds on 15 January 20X2. FinnCo’s functional and presentation currency is the euro. Spot exchange rates between the euro (€) and British pound (£) are as
If the euro is chosen as the Ukraine subsidiary’s functional currency, Eurexim will translate its fixed assets using the:A. average rate for the reporting period.B. rate in effect when the assets were purchased.C. rate in effect at the end of the reporting period.Pedro Ruiz is an analyst for a
Assume that FinnCo had the following income statement information in both 20X1 and 20X2, excluding a foreign currency transaction gain of €200 in 20X1 and a transaction loss of €50 in 20X2.FinnCo is deciding between two alternatives for the treatment of foreign currency transaction gains and
If the euro is chosen as the Ukraine subsidiary’s functional currency, Eurexim will translate its accounts receivable using the:A. rate in effect at the transaction date.B. average rate for the reporting period.C. rate in effect at the end of the reporting period.Pedro Ruiz is an analyst for a
Turkey was one of the few remaining highly inflationary countries at the beginning of the 21st century. Annual inflation rates and selected exchange rates between the Turkish lira (TL) and US dollar during the 2000–2002 period were as follows: Assume that a US-based company established a
If the hryvnia is chosen as the Ukraine subsidiary’s functional currency, Eurexim will translate its inventory using the:A. average rate for the reporting period.B. rate in effect at the end of the reporting period.C. rate in effect at the time the inventory was purchased.Pedro Ruiz is an analyst
Canadaco begins operations on 1 January 20X1, with cash of C$1,500,000 and property and equipment of C$3,000,000. In Case A, Canadaco finances the acquisition of property and equipment with a long-term note payable and begins operations with net monetary liabilities of C$1,500,000 (C$3,000,000
Canadaco’s Canadian dollar (C$) financial statements are translated into euro (€) under three scenarios:(1) the Canadian dollar remains stable against the euro,(2) the Canadian dollar strengthens against the euro,(3) the Canadian dollar weakens against the euro.Relevant exchange rates are as
Based on the information available and Ruiz’s expectations regarding exchange rates, if the hryvnia is chosen as the Ukraine subsidiary’s functional currency, Eurexim will most likely report:A. an addition to the cumulative translation adjustment.B. a translation gain or loss as a component of
After translating Consol-Can’s inventory and long-term debt into the parent company’s currency (US$), the amounts reported on Consolidated Motor’s financial statements on 31 December 20X2 would be closest to (in millions):A. $71 for inventory and $161 for long-term debt.B. $71 for inventory
ABC Company formed a subsidiary in a foreign country on 1 January 20X1, through a combination of debt and equity financing. The foreign subsidiary acquired land on 1 January 20X1, which it rents to a local farmer. The foreign subsidiary’s financial statements for its first year of operations, in
After translating Consol-Can’s 31 December 20X2 balance sheet into the parent company’s currency (US$), the translated value of retained earnings will be closest to:A. $41 million.B. $44 million.C. $46 million.Consolidated Motors is a US-based corporation that sells mechanical engines and
Yahoo! Inc. is a US-based digital media company that reports in US dollars and prepares financial statements in accordance with US GAAP.The stockholders’ equity section of Yahoo!’s consolidated balance sheets includes the following line items:The consolidated statement of stockholders’ equity
In response to the board’s first question, Templeton would most likely reply that such a change would be justified if:A. the inflation rate in the United States became hyperinflationary.B. management wanted to flow more of the gains through net income.C. Consol-Can were making autonomous
In response to the board’s second question, Templeton should reply that if the change is made, the consolidated financial statements for Consolidated Motors would begin to recognize:A. realized gains and losses on monetary assets and liabilities.B. realized gains and losses on non-monetary assets
Below are excerpts from the effective tax rate reconciliation disclosures by two companies:Heineken N.V., a Dutch brewer, and Colgate Palmolive, a US consumer products company. Use the disclosures to answer the following questions:1. Which company’s home country has a lower statutory tax rate?2.
In response to the board’s third question, Templeton should note that the change will most likely affect:A. the cash ratio.B. fixed asset turnover.C. receivables turnover.Consolidated Motors is a US-based corporation that sells mechanical engines and components used by electric utilities. Its
Use the information disclosed in Procter & Gamble Company’s CAGNY [Consumer Analyst Group of New York] conference slides to answer the following questions:1. Why does the company present “organic sales growth”?2. On average, for the four quarters beginning October 2008 and ending
In response to the board’s fourth question, the balance sheet exposure (in C$ millions) would be closest to:A. –19.B. 148.C. 400.Consolidated Motors is a US-based corporation that sells mechanical engines and components used by electric utilities. Its Canadian subsidiary, Consol-Can, operates
Based on the translation method being used for Julius, the subsidiary is most likely:A. a sales outlet for Romulus’s products.B. a self-contained, independent operating entity.C. using the US dollar as its functional currency.Romulus Corp. is a US-based company that prepares its financial
To account for its foreign operations, Romulus has most likely designated the euro as the functional currency for:A. Julius only.B. Augustus only.C. both Julius and Augustus.Romulus Corp. is a US-based company that prepares its financial statements in accordance with US GAAP. Romulus Corp. has two
When Romulus consolidates the results of Julius, any unrealized exchange rate holding gains on monetary assets should be:A. reported as part of operating income.B. reported as a non-operating item on the income statement.C. reported directly to equity as part of the cumulative translation
When Marks translates his forecasted balance sheet for Julius into US dollars, total assets as of 31 December 20X2 (dollars in millions) will be closest to:A. $1,429.B. $2,392.C. $3,703.Romulus Corp. is a US-based company that prepares its financial statements in accordance with US GAAP. Romulus
When Marks converts his forecasted income statement data for Julius into US dollars, the 20X2 gross profit margin will be closest to:A. 39.1%.B. 40.9%.C. 44.6%.Romulus Corp. is a US-based company that prepares its financial statements in accordance with US GAAP. Romulus Corp. has two European
Relative to the gross margins the subsidiaries report in local currency, Romulus’s consolidated gross margin most likely :A. will not be distorted by currency translations.B. would be distorted if Augustus were using the same translation method as Julius.C. will be distorted because of the
If the US dollar were chosen as the functional currency for Acceletron in 2007, Redline could reduce its balance sheet exposure to exchange rates by:A. selling SGD30 million of fixed assets for cash.B. issuing SGD30 million of long-term debt to buy fixed assets.C. issuing SGD30 million in
Redline’s consolidated gross profit margin for 2007 would be highest if Acceletron accounted for inventory using:A. FIFO, and its functional currency were the US dollar.B. LIFO, and its functional currency were the US dollar.C. FIFO, and its functional currency were the Singapore dollar.Redline
If the current rate method is used to translate Acceletron’s financial statements into US dollars, Redline’s consolidated financial statements will most likely include Acceletron’s:A. USD3,178 million in revenues.B. USD118 million in long-term debt.C. negative translation adjustment to
When translating Acceletron’s financial statements into US dollars, Redline is least likely to use an exchange rate of USD per SGD:A. 0.671.B. 0.588.C. 0.654.Redline Products, Inc. is a US-based multinational with subsidiaries around the world. One such subsidiary, Acceletron, operates in
If Acceletron’s financial statements are translated into US dollars using the temporal method, Redline’s consolidated financial statements will most likely include Acceletron’s:A. USD336 million in inventory.B. USD956 million in fixed assets.C. USD152 million in accounts receivable.Redline
Based on Martinez’s conclusions, Stellar’s financial statements are best categorized as:A. non-GAAP compliant.B. GAAP compliant, but with earnings management.C. GAAP compliant and decision useful, with sustainable and adequate returns.Mike Martinez is an equity analyst who has been asked to
Satyam Computer Services Limited, an Indian information technology company, was founded in 1987 and grew rapidly by providing business process outsourcing (BPO) on a global basis. In 2007, its CEO, Ramalinga Raju, was named “Entrepreneur of the Year” by Ernst & Young, and in 2008, the World
In the 2002 Annual Report, inventory was reported at $3,411.8 million. In the 2003 Annual Report, the 2002 inventory value was reported at $2,964.3 million and $447.5 million of inventory was included in other assets. Th is information was contained in Note 6 to the financial statements, reproduced
Based on Conclusion 2, after the acquisition of Solar, Stellar’s earnings are most likely :A. understated.B. fairly stated.C. overstated.Mike Martinez is an equity analyst who has been asked to analyze Stellar, Inc. by his supervisor, Dominic Anderson. Stellar exhibited strong earnings growth
In order to develop and introduce a new product, Digilog created a separate business entity, DBS, that was capitalized with $10 million of convertible debt issued to Digilog. Upon conversion, Digilog would end up owning nearly 100% of DBS. Initially, owners’ equity of DBS consisted of a few
In his follow-up analysis relating to Conclusion 3, Martinez should focus on Stellar’s:A. total accruals.B. discretionary accruals.C. non-discretionary accruals.Mike Martinez is an equity analyst who has been asked to analyze Stellar, Inc. by his supervisor, Dominic Anderson. Stellar exhibited
What will be the impact on Stellar in the current year if Martinez’s belief in Conclusion 4 is correct? Compared with the previous year, Stellar’s:A. current ratio will increase.B. days sales outstanding (DSO) will decrease.C. accounts receivable turnover will decrease.Mike Martinez is an
Two related topics that almost always require special consideration on the part of analysts are asset impairments and restructuring charges. Asset impairments are write downs of assets required when circumstances indicate that the carrying amount of an asset is excessive compared with the expected
Exhibit 5 presents the variables and Beneish’s M -Score for XYZ Corporation (a hypothetical company).1. Would the results of the Beneish model lead an analyst, using a –1.78 M -score as the cutoff , to flag XYZ as a likely manipulator?2. The values of DSR, GMI, SGI, and DEPI are all greater
1. How does the trend in Enron’s operating income compare with the trend in its income after other income and deductions (i.e., Income before interest, minority interests, and income taxes)?2. What items appear to be non-recurring as opposed to being a result of routine operations?How significant
Allou Health & Beauty Care, Inc. was a manufacturer and distributor of hair and skin care products. Exhibit 8 presents excerpts from the company’s financial statements from 2000 to 2002. Following the periods reported in these statements, Allou’s warehouses were destroyed by fire, for which
As noted in the previous section, Sunbeam engaged in various improper accounting practices. Refer to the excerpt from Sunbeam’s statement of cash flows in Exhibit 24 to answer the following questions:1. One of the ways that Sunbeam misreported its financial statements was improperly inflating and
An excerpt from the statement of cash flows from the fiscal 2000 annual report of Nautica Enterprises, an apparel manufacturer, is shown as Exhibit 25 . An excerpt from the statement of cash flows from the company’s fiscal 2001 annual report is shown in Exhibit 26 . Use these two excerpts to
In August 2012, a Wall Street Journal article listed six companies that were carrying more goodwill on their balance sheets than the companies’ market values ( Thurm 2012 ). At the top of the list was Sealed Air Corporation (NYSE: SEE), a company operating in the packaging and containers
Use the excerpts from Royal Dutch Shell’s note disclosing information about financial instruments in Exhibit 32 to answer the following questions:1 . Does Shell appear to take a centralized or decentralized approach to managing interest rate risk?2 . For the year ended 31 December 2012, Shell
If the accounting rules were to change, Silk Road’s assets would increase by approximately:A. 1,297.B. 1,576.C. 1,704.Sergei Leenid, CFA, is a long-only fixed income portfolio manager for the Parliament Funds. He has developed a quantitative model, based on financial statement data, to predict
If the accounting rules were to change, Silk Road’s interest coverage ratio would be closest to:A. 3.03.B. 3.50.C. 5.04.Sergei Leenid, CFA, is a long-only fixed income portfolio manager for the Parliament Funds. He has developed a quantitative model, based on financial statement data, to predict
If the accounting rules were to change, Silk Road’s financial leverage ratio would be closest to:A. 1.37.B. 1.79.C. 2.92.Sergei Leenid, CFA, is a long-only fixed income portfolio manager for the Parliament Funds. He has developed a quantitative model, based on financial statement data, to predict
Will the change in accounting rules impact the result of the initial screening process for Colorful Concepts?A. It passes the screens now, but will not pass if the accounting rules change.B. It passes the screens now and will continue to pass if the accounting rules change.C. It fails the screens
Based on Leenid’s analysis of the results of the initial screening, relative to Colorful Concepts the bond rating of Silk Road should be:A. lower.B. higher.C. the same.Sergei Leenid, CFA, is a long-only fixed income portfolio manager for the Parliament Funds. He has developed a quantitative
Ignoring the potential impact of any accounting change and excluding the investment in associates, the net profit margin for Colorful Concepts would be closest to:A. 6.0%.B. 7.2%.C. 7.5%.Sergei Leenid, CFA, is a long-only fixed income portfolio manager for the Parliament Funds. He has developed a
Ignoring the impact of any accounting change, the asset turnover ratio for Colorful Concepts excluding the investments in associates would:A. stay the same.B. increase by 0.10.C. decrease by 0.10.Sergei Leenid, CFA, is a long-only fixed income portfolio manager for the Parliament Funds. He has
Excluding the investments in associates would result in the interest coverage ratio for Colorful Concepts being:A. lower.B. higher.C. the same.Sergei Leenid, CFA, is a long-only fixed income portfolio manager for the Parliament Funds. He has developed a quantitative model, based on financial
Over the three-year period presented in Exhibit 1, Bickchip’s return on equity is best described as:A. stable.B. trending lower.C. trending higher.Quentin Abay, CFA, is an analyst for a private equity firm interested in purchasing Bickchip Enterprises, a conglomerate. His first task is to
Based on the DuPont analysis, Abay’s belief regarding ROE is most likely based on:A. leverage.B. profit margins.C. asset turnover.Quentin Abay, CFA, is an analyst for a private equity firm interested in purchasing Bickchip Enterprises, a conglomerate. His first task is to determine the trends in
Based on Abay’s criteria, the business segment best suited for divestiture is:A. medical equipment.B. power and industrial.C. automation equipment.Quentin Abay, CFA, is an analyst for a private equity firm interested in purchasing Bickchip Enterprises, a conglomerate. His first task is to
Bickchip’s cash-flow-based accruals ratio in 2009 is closest to:A. 9.9%.B. 13.4%.C. 23.3%.Quentin Abay, CFA, is an analyst for a private equity firm interested in purchasing Bickchip Enterprises, a conglomerate. His first task is to determine the trends in ROE and the main drivers of the trends
The cash-flow-based accruals ratios from 2007 to 2009 indicate:A. improving earnings quality.B. deteriorating earnings quality.C. no change in earnings quality.Quentin Abay, CFA, is an analyst for a private equity firm interested in purchasing Bickchip Enterprises, a conglomerate. His first task is
The ratio of operating cash flow before interest and taxes to operating income for Bickchip for 2009 is closest to:A. 1.6.B. 1.9.C. 2.1.Quentin Abay, CFA, is an analyst for a private equity firm interested in purchasing Bickchip Enterprises, a conglomerate. His first task is to determine the trends
Based on the ratios for operating cash flow before interest and taxes to operating income, Abay should conclude that:A. Bickchip’s earnings are backed by cash flow.B. Bickchip’s earnings are not backed by cash flow.C. Abay can draw no conclusion due to the changes in the ratios over
Compared to holding securitized finance receivables on the balance sheet, treating them as sold had the effect of reducing Software Services’ reported financial leverage by:A. 6.8%.B. 7.4%.C. 9.2%.Michael Wetstone is an equity analyst covering the software industry for a public pension fund.
Had the securitized finance receivables been held on the balance sheet, Software Services’ ratio of liabilities to total capital would have been closest to:A. 73.0%.B. 74.8%.C. 80.4%.Michael Wetstone is an equity analyst covering the software industry for a public pension fund. Prior to comparing
How much of PDQ’s value can be explained by its equity stake in Astana?A. 6.5%.B. 10.6%.C. 20.0%.Michael Wetstone is an equity analyst covering the software industry for a public pension fund. Prior to comparing the financial results of Software Services Inc. and PDQ GmbH, Wetstone discovers the
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