StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Questions For Financial Quiz - Essay Example

Cite this document
Summary
This essay presents a set of financial questions and answers where the situation is that the person has just obtained financial information for the past 2 years for Powell Panther Corporation where the current stock price is $15 per share and you have to calculate corresponding indicators…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.7% of users find it useful
Questions For Financial Quiz
Read Text Preview

Extract of sample "Questions For Financial Quiz"

Take Home Quiz ____________________ See the following information for the Questions through 8. The company’s CEO Joe Lawrence was unhappy with the firm’s performance. You have just obtained financial information for the past 2 years for Powell Panther Corporation. The current stock price is $15 per share. In 1999, the company held 45 million total shares. In January 2000, the company issued additional 5 million common stocks, resulting in 50 million total shares outstanding as of fiscal year end 2000.

This firm is producing drugs for the cancel treatment. The average P/E ratio for the industry (pharmaceutical) is 20. Powell Panther Corporation: Income Statement for Year Ending December 31 (Millions of Dollars) 2000 1999 Sales $1,200.0 $1,000.0 COGS (Costs of Good Sold) 620.0 550.0 Operating costs excluding depreciation 400.0 300.0 Depreciation 30.0 25.0 Earning before interest and taxes $ 150.0 $ 125.0 Less interest 21.

7 20.2 Earning before taxes $ 128.3 $ 104.8 Taxes (40%) 51.3 41.9 Net income $ 77.0 $ 62.9 Powell Panther Corporation: Balance Sheets as of December 31 (Million of Dollars) 2000 1999 ASSET Cash and marketable Securities $ 12.0 $ 10.0 Accounts receivable 180.0 150.0 Inventories 180.0 200.0 Net plant and equipment 300.0 250.0 Total assets $ 672.0 $ 610.0 LIBILITES AND EUITY Accounts payable $ 108.

0 $ 90.0 Notes payable 67.0 51.0 Accruals 72.0 60.0 Long-term bonds 150.0 150.0 Common stock (50 million shares) 50.0 50.0 Retained earnings 225.0 208.5 Total liabilities and equity $ 672.0 $ 610.0 1. Calculate firm’s ROA, ROE, Net Profit Margin, and TIE (Times Interest Earned) ratio for both 1999 and 2000. 2000 1999 ROA 77/672 11.46% 62.9/610 10.31% ROE 77/275 28.00% 62.9/258.5 24.33% Net Profit Margin 77/1200 6.42% 62.9/1000 6.

29% Times Interest Earned 150/21.7 6.91 125/20.2 6.19 2. Some executives, including CEO, are not quite happy with firm’s performance on profitability, especially when they look back last year (1999). However, you believe that the company has improved its profitability during the period. Can you explain why you believe so? The profitability indicators of Powell Panther Corporation showed improvement in 2000. It could be noted from the ratios values calculated above that the company generated higher returns on its total assets and equity.

It implied that the company generated higher profit per $1 invested in the company’s assets. Furthermore, the company’s ability to generate higher return on sales was noted in 2000. Furthermore, the company had higher operating profits in 2000 to cover the interest payments on its long-term loan. 3. Calculate firm’s Current and Quick ratio for both 1999 and 2000. 2000 1999 Current Ratio 372/247 1.51 360/201 1.79 Quick Ratio 192/247 0.78 160/201 0.80 4. Why do investors want to find out firm’s current and quick ratio before they purchase its stocks?

Investors are interested in both ratios as they evaluated the company’s ability to meet its operational and debt obligations. A weak liquidity position would imply that the company would have to borrow more and it would reduce the return on investment to shareholders. 5. Calculate firm’s Debt ratio for both 1999 and 2000. Use firm’s long-term debt for the calculation. 2000 1999 Debt Ratio 150/275 0.55 150/258.5 0.58 6. Explain how a firm can save its taxes through depreciation. The depreciation is a non-cash item, which is charged to the company’s profits.

The higher is the depreciation charge the low is the company’s profits subjected to tax. Therefore, depreciation can reduce the tax amount payable on profits. 7. Calculate firm’s EPS and P/E ratio? 2000 1999 EPS 77/50 1.54 62.9/45 1.40 P/E 15/1.54 9.74 8. Some financial analysts argue that Panther Corporation is now highly overvalued in the stock market. They, therefore, recommend selling all the shares if you have any. However, you have totally different opinion. You believe the stock is greatly undervalued and thus, it may be good time to buy.

Please explain why you believe so? You can assume that Panther Corporation is financially and operationally as good as most of its competitors in the industry. The company’s P/E ratio value is 9.74, which is below the industry average of 20 but the price is still at higher multiple of the company’s EPS. It suggests that the market has the confidence in the company’s future growth. The following information is for Question 9 and 10. Balance Sheet for 1993 Cash $400,000 Account Payable $800,000 Account Receivable $900,000 Notes Payable $500,000 Long-term Debt $1,000,000 Inventory $1,200,000 Common Stock $1,800,000 Net Fixed Assets $2,500,000 Retained Earnings $900,000 --------------------------------------------- -------------------------------------------------- Total Assets $5,000,000 Total Liab.

& Equity $5,000,000 Additional Information Projected Sales for 1994 = $9,200,000, Sales for 1993 = $8,000,000 Dividend payout ratio and Net Profit Margin will be 20 % and 5%, respectively. 9. Compute Total Financing Needed. Assume that the plant is operated at full capacity. Total Financing Needed (5000000/8000000)*(9200000-8000000)-(2300000/8000000)*(9200000-8000000)-(0.05)*(9200000)*(1-.2) Total Financing Needed 37,000 10. Compute the expected additional common stock needed by Sharkton in 1994 to support this increase in sales assuming that the firm’s current ratio for 1994 should be equal to or higher than 2.0. Also, firm’s debt ratio (long-term debt divided by total assets) should be less than 0.2. Assume that the plant is operated at full capacity.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Questions For Financial Quiz Essay Example | Topics and Well Written Essays - 250 words”, n.d.)
Questions For Financial Quiz Essay Example | Topics and Well Written Essays - 250 words. Retrieved from https://studentshare.org/finance-accounting/1679049-questions-for-financial-quiz
(Questions For Financial Quiz Essay Example | Topics and Well Written Essays - 250 Words)
Questions For Financial Quiz Essay Example | Topics and Well Written Essays - 250 Words. https://studentshare.org/finance-accounting/1679049-questions-for-financial-quiz.
“Questions For Financial Quiz Essay Example | Topics and Well Written Essays - 250 Words”, n.d. https://studentshare.org/finance-accounting/1679049-questions-for-financial-quiz.
  • Cited: 0 times

CHECK THESE SAMPLES OF Questions For Financial Quiz

Environmental Geology

Scenes of the slick out in the gulf and tar balls on the beaches are probably the defining images of the summer of 2010.... News reports have covered every possible angle of the disaster,… British Petroleum is obviously the bad guy in the story as it is being told now.... But what about petroleum itself?...
7 Pages (1750 words) Research Paper

Brand Integrity

A quiz comprising of ten questions that helps examine how connected the employees are to the brand promise is also mentioned in the article.... It is therefore important… The brand manager should be able to think through the maze of financial data and disturbing news and should be able to keep focus on the brand.... The brand manager should be able to think through the maze of financial data and disturbing news and should be able to keep focus on the brand....
2 Pages (500 words) Assignment

Festival and events

hellip; The Australian Red Cross group can support our trivia night event by offering several things including provision of a fundraising kit that consists of posters, In order for the quiz trivia event to be successful, several resources must be paid for through sponsorship and funding of the event.... Firstly, we have generated social value for the night quiz trivia by providing prizes that act as incentives to encourage participants.... NOUTItemCost ($)ItemCost ($)quiz Night ticket sales$4000 ( 200 tickets)Sound system (Sound Guys Company) 70Virgin Australia Airlines (donation)1000Venue (Apple cross Anglican Church)100Toyota company (donation)800DJ45Coles Supermarkets (food hampers)230Food470Elizabeth Shop(beauty products)250Refreshments100Dymocks book shop (books)400Electricity100Buying tickets (200 tickets)40Security 30Totals 5880865Profit (5880-865)=5015...
2 Pages (500 words) Essay

Festival and events

hellip; The Australian Red Cross group can support our trivia night event by offering several things including provision of a fundraising kit that consists of posters, Festival and Events In order for the quiz trivia event to be successful, several resources must be paid for throughsponsorship and funding of the event.... Firstly, we have generated social value for the night quiz trivia by providing prizes that act as incentives to encourage participants (Knight Foundation, 2011)....
2 Pages (500 words) Essay

Plan for Developing New Partnership Firm: Engulf and Devour

The fact that the new prospective engineering consulting company has secured a contract for 12 months only poses the danger of the likelihood of a future job and financial crisis, on the event that the contract is not renewed.... The exciting new of establishing a new engineering consulting firm presents a better prospect for earning good money for the director of engineering services at Engulf and Devour, considering the fact that the opportunity offers a salary of $50,000 to be shared among the three… This would translate to $600,000 per year to be shared amongst the three partners, which then means that each partner will be earning $200,000 per year....
5 Pages (1250 words) Essay

Self assessment assignment

Guardians are significant in the society because they are patient and ready to influence other people to be better; to have a more positive outlook on life.... They believe in nurturing other people's talents.... They are good caregivers both in the family… They are patient and have an eye for detail to most events in life (Cohen & Swerdlik, 2002)....
4 Pages (1000 words) Essay

The Causes and Health Related Impact of Smoking

The paper "The Causes and Health Related Impact of Smoking" describes that smoking develops as a harmless habit.... While the college pals do not include non-smoking kids in the groups, the elite groups in clubs and offices do not include chain smokers among them.... hellip; Peer pressure can be used to motivate kids not to smoke too....
6 Pages (1500 words) Research Proposal
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us