Corporate Finance (Berk/DeMarzo)- Chapter 2– Introduction to Financial Statement Analysis
2.1 The Disclosure of Financial Information
1) U.S. public companies are required to file their annual
financial statements with the U.S. Securities and Exchange Commission on which
form?
A)
10–A
B)
10–K
C)
10–Q
D)
10–SEC
2)
Which of the following is not a financial statement that
every public company is required to produce?
A)
Income Statement
B)
Statement of Sources and Uses of Cash
C)
Balance Sheet
D)
Statement of Stockholders’ Equity
3)
The third party who checks
annual financial statements to ensure that they are prepared according
to GAAP and verifies that the information reported is reliable is the
A)
NYSE Enforcement Board.
B)
Accounting Standards Board.
C)
Securities and Exchange Commission (SEC).
D)
auditor.
2.2 The Balance Sheet
1)
Which of the following balance sheet equations is
incorrect?
A)
Assets– Liabilities= Shareholders’ Equity
B)
Assets= Liabilities+ Shareholders’ Equity
C)
Assets– Current Liabilities= Long Term Liabilities
D)
Assets– Current Liabilities= Long Term Liabilities+ Shareholders’
Equity
3)
Accounts payable is a
A)
Long–term liability.
B)
Current Asset.
C)
Long–term asset.
D)
Current Liability.
4)
A 30 year mortgage loan is a
A)
Long–term liability.
B)
Current Liability.
C)
Current Asset.
D)
Long–term asset.
5)
Which of the following statements regarding the balance
sheet is incorrect?
A)
The balance sheet provides a snapshots of the firm’s
financial position at a given point in time.
B)
The balance sheet lists the firm’s assets and liabilities.
C)
The balance sheet reports stockholders’ equity on the right
hand side.
D)
The balance sheet reports liabilities on the left hand
side.
Use the table for the question(s) below.
Consider the following balance sheet:
Luther
Consolidated
December 31,
|
Assets
|
2006
|
2005
|
|
Liabilities and Stockholders’ Equity
|
2006
|
2005
|
Current Assets
|
|
|
|
Current Liabilities
|
|
|
Cash
|
63.6
|
58.5
|
|
Accounts payable
|
87.6
|
73.5
|
Accounts receivable
|
55.5
|
39.6
|
|
Notes payable /
short–term debt
|
10.5
|
9.6
|
Inventories
|
45.9
|
42.9
|
|
Current maturities of long–term debt
|
39.9
|
36.9
|
Other current assets
|
6.0
|
3.0
|
|
Other current liabilities
|
6.0
|
12.0
|
Total current assets
|
171.0
|
144.0
|
|
Total current liabilities
|
144.0
|
132.0
|
|
|
|
|
|
|
|
Long–Term Assets
|
|
|
|
Long–Term Liabilities
|
|
|
Land
|
66.6
|
62.1
|
|
Long–term debt
|
239.7
|
168.9
|
Buildings
|
109.5
|
91.5
|
|
Capital lease
|
—
|
—
|
Equipment
|
119.1
|
99.6
|
|
Total Debt
|
239.7
|
168.9
|
Less accumulated
depreciation
|
(56.1)
|
(52.5)
|
|
Deferred taxes
|
22.8
|
22.2
|
Net property, plant, and equipment
|
239.1
|
200.7
|
|
Other long–term liabilities
|
—
|
—
|
Goodwill
|
60.0
|
—
|
|
Total long–term
|
262.5
|
191.1
|
Other long–term assets
|
63.0
|
42.0
|
|
Total liabilities
|
406.5
|
323.1
|
Total long–term assets
|
362.1
|
242.7
|
|
Stockholders’ Equity
|
126.6
|
63.6
|
|
|
|
|
|
|
|
Total Assets
|
533.1
|
386.7
|
|
Total liabilities and Stockholders’ Equity
|
533.1
|
386.7
|
6)
What is Luther’s net working capital in 2005?
A)
$12 million
B)
$27 million
C)
$39 million
D)
$63.6 million
7)
If in 2006 Luther has 10.2 million shares outstanding and
these shares are trading at $16 per share, then Luther’s Market–to–book ratio
would be closest to:
A)
0.39
B)
0.76
C)
1.29
D)
2.57
8)
When using the book value of equity, the debt to equity
ratio for Luther in 2006 is closest to:
A)
2.21
B)
2.29
C)
2.98
D)
3.03
9)
If in 2006 Luther has 10.2 million shares outstanding and
these shares are trading at $16 per share, then using the market value of
equity, the debt to equity ratio for Luther in 2006 is closest to:
A)
1.71
B)
1.78
C)
2.31
D)
2.35
10)
If in 2006 Luther has 10.2 million shares outstanding and
these shares are trading at $16 per share, then what is Luther’s Enterprise
Value?
A)
–$63.3
million
B)
$353.1 million
C)
$389.7 million
D)
