Ch. 8 Financial Analysis

Question 1

A company’s outstanding shares include its restricted stock, but NOT its ______ stock.

Answer 1

Not treasury stock

Question 2

Is commercial paper part of the capital structure of a corporation?

Answer 2

No

Question 3

________ represents the amount that the public pays over par value for a
company’s stock

Answer 3

Additional Paid in Capital

Question 4

When calculating pension fund liabilities, using a high discount rate is considered ______.

Answer 4

Aggressive

Question 5

What tax rate should be used when calculating projections?

Answer 5

Marginal tax rate

Question 6

Is the marginal tax rate the highest? What does it include?

Answer 6

Yes; includes federal tax + state tax

Question 7

Net operating losses (NOLs) that occurred prior to 2018 can be carried forward for ____ years and carried back for ____ years. From 2019 on, NOLs are deductible to the extent of _____% of the corporation’s income, can be carried forward indefinitely, but can no longer be carried back.

Answer 7

2018- carried forward for 20 years and carried back for 2 years

2019- deductible to 80% of corporation’s income; can be carried forward indefinitely; can’t be carried back

Question 8

Assuming inflation or rising costs, FIFO has ____ COGS, but _____ margins, _____ profits (earnings), ____ taxes, and ____ inventory valuation.

Answer 8

Lower COGS; higher margins, profits, taxes and inventory valuation

Question 9

Assuming inflation or rising costs, LIFO has ____ COGS, but _____ margins, ____ profits (earnings), ____ taxes, and _____ inventory valuation.

Answer 9

Higher COGS; lower margins, lower profits, lower taxes, lower inventory valuation

Question 10

Direct manufacturing costs are generally considered ____ costs.

Answer 10

Variable

Question 11

The _____ margin should be lower than the EBITDA margin.

Answer 11

EBIT

Question 12

If a company’s total assets increased and its total liabilities remained the same, the value of the company’s ______ must have increased.

Answer 12

Shareholder’s Equity

Question 13

Interest that a company pays on its debt outstanding and the interest income it receives are recorded on the CF statement under CF from _____ activities. Principal payments that are made to retire debt outstanding are reported as a reduction in the CF statement under the _____ activities section.

Answer 13

Operating; Financing

Question 14

T/F: When calculating a company’s debt-to-total capital, the debt that may be included in the formula are both short-term and long-term debt, mortgages payable, convertible debt, capital leases, and a revolver credit facility

Answer 14

True