Financial Statements Analysis

Which of the following is not a measure of financial performance

• ROA

• ROE

• ROIC

• ROP

To measure value creation, we should look at...

• Net profit margin

• Market-to-book ratio

• Asset turnover ratio

• Debt-to-equity ratio

Which of the following ratio is NOT part of the cash conversion cycle?

• Average days in inventory

• Average collection period

• Average payment period

• Average payback period

Which of the following business likely has the highest cash conversion cycle?

• Central Department Store

• Hop Inn Hotel

• MK Restaurant

• Modernform

Which of the following is the effect of having long cash conversion cycle?

• Better net profit margin for products/services

• Greater credibility from the perspective of suppliers

• More retained earnings in the long-run

• More reliance on external finance to support growth

For most companies, the common ordering of profit margins is:

• Gross profit margin > EBIT margin > Net profit margin

• Net profit margin > EBIT margin > Gross profit margin

• EBIT margin > Net profit margin > Gross profit margin

• EBIT margin > Gross profit margin > Net profit margin

Which of the following actions is LEAST LIKELY to increase ROIC?

• Increase sales price per item

• Increase variety in product portfolio

• Reduce net operating working capital

• Reduce unnecessary long-term assets

Currently, a company has bank loan with interest rate of 8%. Suppose the company did not use bank loan but used shareholder equity instead (while assets remain the same), which of the following statements is FALSE?

• Net profit margin with be higher

• ROE will be lower

• ROA will be lower

• ROA will be higher

Which of the following is NOT a problem from carrying a lot of inventory?

• Inventory needs to be stored, which can be expensive

• Inventory can be come obsolete, resulting in loss of value

• Inventory can be lost (also known as "shrinkage")

• Inventory can increase sales opportunities

If you want to know how a company is financed (that is, the capital structure), which of the following ratios is the LEAST useful?

• Leverage ratio

• Debt-to-capital ratio

• Debt-to-equity ratio

• Interest coverage ratio