Question

Question 1

Apple has the following financial statement information for fiscal year 2001 (in millions):

Income Statement	2001	Balance Sheet	2001	2000
Revenues	$5,363	Cash and Marketable Securities	$2,310	$1,191
Cost of Goods Sold	4,026	Inventory	11	33
Gross Profit	1,337	Total Current Assets	5,143	5,427
SG&A Exp.	1,568	Total Assets	6,021	6,803
Net Income (Net Loss)	-25	Total Current Liabilities	1,518	1,933
		Total Liabilities	2,101
		Total Equity	3,920	4,107
Sales (Year 2000)	7,983	Cash Flow Statement
Net Income (Year 2000)	786	Cash Flows from Operations	185

Using common-size analysis, Apple's total liabilities for 2001 is:

	a.	39.2%
	b.	53.6%
	c.	38.7%
	d.	34.9%

Question 2

Following Question 1, Apple's operating cash flow ratio for 2001 is:

	a.	12.2%
	b.	3.5%
	c.	3.1%
	d.	3.6%

Question 3

Following Question 1, Apple's inventory turnover ratio for 2001 is:

	a.	243.8x
	b.	547.4x
	c.	183.0x
	d.	366.0x

Question 4

Following Question 1, Apple's working capital turnover ratio for 2001 is:

	a.	1.13x
	b.	2.32x
	c.	1.48x
	d.	1.51x

Question 5

Following Question 1, Apple's debt ratio for 2001 is:

	a.	34.9%
	b.	39.2%
	c.	25.2%
	d.	53.6%

Question 6

Following Question 1, Apple's gross margin for 2001 is:

	a.	24.8%
	b.	1.9%
	c.	22.2%
	d.	75.1%

Question 7

Following Question 1 and using common-size analysis, Apple's Gross Profit is for 2001 is:

	a.	1.9%
	b.	24.9%
	c.	100.0%
	d.	22.2%

Question 8

Following Question 1, Apple's current ratio for 2001 is:

	a.	338.8%
	b.	152.2%
	c.	29.5%
	d.	244.8%

Question 9

Following Question 1, Apple's total asset turnover for 2001 is:

	a.	89.1%
	b.	41.8%
	c.	119.6%
	d.	83.6%

Question 10

Following Question 1, Apple's debt to equity ratio for 2001 is:

	a.	38.7%
	b.	34.9%
	c.	53.6%
	d.	39.2%

Question 11

Following Question 1, Apple's return on sales ratio for 2001 is:

	a.	0.5%
	b.	24.9%
	c.	100.0%
	d.	9.8%

Question 12

The following financial information is given for General Electric for fiscal year 2001 (in thousands):

Sales	$125,679	Cash	$  9,082
Cost of Goods Sold	42,008	Inventory	8,565
Gross Profit	83,671	Current Assets	340,708
Net Income	13,684	Total Assets	495,023
Operating Cash Flow	32,195	Current Liabilities	198,904
Earnings per share	1.38	Total Liabilities	440,111
Dividends per share	0.66	Total Equity	54,824
Net Income (fiscal year 2000)	12,735	Total Assets (fiscal year 2000)	437,006
Sales (fiscal year 2000)	129,417	Inventory (fiscal year 2000)	7,812

In GE's 2001 common-size income statement, Net Income is equal to:

	a.	10.9%
	b.	2.8%
	c.	16.4%
	d.	100.0%

Question 13

Following Question 12, in GE's 2001 common-size balance sheet, Current Liabilities are equal to:

	a.	45.2%
	b.	158.3%
	c.	362.9%
	d.	40.2%

Question 14

Following Question 12, the Cash Ratio for GE in 2001 is:

	a.	58.4%
	b.	4.6%
	c.	16.6%
	d.	2.1%

Question 15

Following Question 12, GE's 2001 Long-term Debt to Equity Ratio is:

	a.	9.0
	b.	4.4
	c.	8.0
	d.	3.6

Question 16

Following Question 12, GE's 2001 Return on Assets is:

	a.	25.0%
	b.	2.8%
	c.	2.9%
	d.	27.0%

  

Question 17

Following Question 12, GE's 2001 Dividend Payout is:

	a.	47.8%
	b.	0.01%
	c.	10.9%
	d.	42.5%

Question 18

Which of the following ratios is part of the Du Pont Model:

	a.	Dividend Payout
	b.	Operating Cash Flow Ratio
	c.	Current Ratio
	d.	Return on Equity

Question 19

Using the Du Pont Model, solvency (leverage) is measured as:

	a.	Sales / average total assets
	b.	Average total assets / average common equity
	c.	Sales / average working capital
	d.	Net income / sales

Question 20

Using the Du Pont Model, return on assets can be calculated as:

	a.	Return on Sales x Return on Assets
	b.	Return on Equity x Total Assets
	c.	Return on Sales x Asset Turnover
	d.	Gross Margin x Inventory Turnover

Question 21

A limitation on the use of ratios analysis is:

	a.	Relative size of the companies is not considered
	b.	The numbers used are assumed to be correct
	c.	Important qualitative issues such as business strategy are not involved
	d.	It can be difficult to determine what results are good or bad
	e.	All of the above

Question 22

The following data is given for annual operations for Hilton Hotels (in millions):

Hilton

	1997	1998	1999	2000	2001
Revenue	$1,475	$1,769	$1,959	$3,177	$2,632
Gross Profit	395	464	567	1,008	686
Net Income	250	297	174	272	166

Given the data above, the growth analysis for Hilton shows revenue growth for 1999 of:

	a.	10.7%
	b.	34.4%
	c.	8.9%
	d.	24.7%

Question 23

Following Question 22, the growth analysis for Hilton shows net income growth for 2000 of:

	a.	39.0%
	b.	36.0%
	c.	56.3%
	d.	8.8%

Question 24

Following Question 22, which year would be used as the base year for Hilton?

	a.	1997
	b.	1998
	c.	2001
	d.	2000

Question 25

Following Question 22, trend analysis for Hilton shows gross profit for 2001 of:

	a.	413.2
	b.	26.1
	c.	173.7
	d.	68.1

Question 26

Below are quarterly performance data for Marriott:

	Mar 2002	Dec 2001	Sept 2001	Jun 2001	Mar 2001
Revenue	$2,364	$2,868	$2,373	$2,450	$2,461
Net Income	82	-116	101	130	121

The quarterly % change in revenue for March 2002 from the same quarter one ago was:

	a.	3.5%
	b.	17.6%
	c.	96.1%
	d.	3.9%

Question 27

Following Question 26 and using common-size, September 2001 net income would be:

	a.	4.3%
	b.	100.0%
	c.	18.8%
	d.	16.5%

Question 28

Big Bill Computer has a stock price of $50, an EPS of $4.80, projected earnings growth of 8% a year and pays dividends of $2 per share. It is an investment fit to which fund?

	a.	Gotrocks Growth Fund
	b.	Gotrocks Income Fund
	c.	Gotrocks Value Fund
	d.	Gotrocks Money Market Fund

Question 29

Sell Co. has a stock price of $15, 2.3 millions shares outstanding, total stockholders equity of $12.6 million and total assets of $20 million. Sell Co. has a market to book ratio of:

	a.	$11.6 million
	b.	2.7x
	c.	1.7x
	d.	1.2x

Question 30

Following Question 29, Sell Co. has an intrinsic value of $18. What is the intrinsic value to price ratio?

	a.	1.7
	b.	$41.4 million
	c.	2.7
	d.	1.2

Question 31

The following financial information is given for Du Pont and Dow for fiscal year 2001:

	Du Pont	Dow
Closing Stock Price, Feb. 15, 2002	44.90	30.57
EPS (actual for 2001)	4.50	-0.46
EPS (forecast for 2002)	1.60	0.52
Dividend per share	1.40	1.34
5 year forecast earnings growth rate	10.2%	10.0%
Intrinsic value per share	103.84	33.38

Given the Feb. 15 stock prices, Du Pont & Dow have PE ratios (based on year-ahead EPS forecast) of:

	a.	28.06 & 66.46, respectively
	b.	32.07 & 22.81, respectively
	c.	9.98 & 58.79, respectively
	d.	28.06 & 58.79, respectively

Question 32

Following Question 31, given the Feb. 15 stock prices, Du Pont & Dow have dividend yields of:

	a.	3.56% & 1.70%, respectively
	b.	3.12% & 4.38%, respectively
	c.	31.11% & 2.58%, respectively
	d.	13.72% & 13.40%, respectively

Question 33

Following Question 31, given the Feb. 15 stock prices, PE based on actual EPS & 5-year-ahead earnings forecast, Du Pont has a PEG of:

	a.	2.75
	b.	3.14
	c.	0.98
	d.	4.40

Question 34

Following Question 31, based on PEG, which company seems to be the better investment opportunity?

	a.	Dow because the PEG is less than the benchmark cutoff of 1
	b.	Du Pont because of the very high PEG
	c.	Du Pont because the PEG is less than the benchmark cutoff of 1
	d.	Dow because of the very high PEG

Question 35

Following Question 31, based on intrinsic value to share price, Du Pont and Dow are:

	a.	Du Pont is undervalued but Dow is overvalued
	b.	Both overvalued
	c.	Du Pont is overvalued but Dow is undervalued
	d.	Both are undervalued

Question 36

The following financial information is given for Hilton & Marriott:

	Hilton	Marriott
Closing Stock Price, October 8, 2002	10.54	27.46
EPS (actual for 2001)	0.45	0.92
EPS (forecast for 2002)	0.51	1.83
Dividend per share	0.08	0.28
5 year forecast earnings growth rate	15.1%	15.7%
Common shares outstanding (thousands)	376,025	241,801

Given the October 8 stock prices:

	a.	Based on actual EPS Marriott has a higher PE than Hilton
	b.	Based on either actual or forecast EPS, Marriott has a PE almost double that of Hilton
	c.	Hilton s PE rises from actual to forecast because of poor performance
	d.	Based on forecast EPS Marriott has a higher PE than Hilton

Question 37

Following Question 36, based on the dividend yields for Hilton & Marriott:

	a.	Both are excellent fits to the Gotrocks Income Fund
	b.	Marriott has a higher yield than Hilton at 1.0% versus 0.8% for Hilton
	c.	Hilton has a high yield of 17.8%
	d.	Both Hilton & Marriott pay out dividends higher than actual earnings

Question 38

Following Question 36, given the October 8 stock prices, PE based on forecast EPS & 5-year-ahead earnings forecast, Hilton & Marriott have PEGs of:

	a.	1.55 & 1.90, respectively
	b.	0.70 & 1.75, respectively
	c.	20.67 & 15.01, respectively
	d.	1.37 & 0.96, respectively

Question 39

Following Question 36, based on PEG (using forecast EPS), which company seems to be the better investment opportunity?

	a.	Hilton because of its very high PEG
	b.	Hilton because its PEG is lower than Marriott
	c.	Marriott because of the very high PEG
	d.	Marriott because the PEG is less than the benchmark cutoff of 1

Question 40

Following Question 36, which company has the higher market capitalization?

	a.	Marriott because its stock price is more than twice as high as Hilton
	b.	Hilton valued at $14.72 billion versus Marriott at $11.89 billion
	c.	Marriott valued at $6.64 billions versus Hilton at $3.96 billion
	d.	Hilton because its book value is much higher than Marriott

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Answer 1

1.

Total Liabilities in 2001 = $2,101

Total Equity = $3,920

Using common-size analysis, Apple's total liabilities for 2001 is calculated blow:

Liability as percentage of total assets = $2,101 / ($2,101 + $3,920)

                                                            = $2,101 / $6,021

                                                            = 34.90%

Using common-size analysis, Apple's total liabilities for 2001 is 34.90%.

Option (D) is correct answer.

2.

Operating Cash flow ratio = Operating cash flow / Total Assets

                                           = $185 / $6,021

                                           = 3.10%

Operating cash flow ratio is 3.10%.

Option (C) is correct answer.

3.

Inventory Turnover ratio = COGS / Total Inventory

                                       = $4,026 / $11

                                       = 366X

Inventory turnover ratio is 366X.

Option (D) is correct answer.

4.

Working capital = Current Assets – Current Liabilities

                         = $5,143 - $1,518

                          = $3,625

Working capital is $3,625.

Working capital turnover ratio = Total Sales / Working capital

                                               = $5,363 / $3,625

                                               = 1.48X

Working capital turnover ratio is 1.48X.

Option (C) is correct answer