FUND. OF CORPORATE FIN. 18MNTH ACCESS
15th Edition
ISBN: 9781259811913
Author: Ross
Publisher: MCG CUSTOM
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Textbook Question
Chapter 3, Problem 10CRCT
Industry-Specific Ratios [LO2] There are many ways of using standardized financial information beyond those discussed in this chapter. The usual goal is to put firms on an equal footing for comparison purposes. For example, for auto manufacturers, it is common to express sales, costs, and profits on a per-car basis. For each of the following industries, give an example of an actual company and discuss one or more potentially useful means of standardizing financial information:
a. Public utilities.
b. Large retailers.
c. Airlines.
d. Online services.
e. Hospitals.
f. College textbook publishers.
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Students have asked these similar questions
Which of the following statements is incorrect?
Question 6 options:
Many large firms operate different divisions in different industries, and this makes it hard to develop a meaningful set of industry benchmarks for these types of firms.
Financial ratios should be interpreted with caution because it may be difficult to say with certainty what is a "good" value. For example, in the case of the current ratio, a "good" value is neither high nor low.
Financial ratios should be interpreted with caution because higher value of profitability ratios imply greater efficiency in asset management.
Ratio analysis facilitates comparisons by standardizing numbers.
Financial ratios should be interpreted with caution because there exist seasonal and accounting differences that can reduce their comparability.
20.
Which of the following factor does not affect a company's financial ratios?
Select one:
a.
Aggressive revenue recognition practices.
b.
Accounting for similar economic fundamentals in a similar fashion
c.
The timing of asset purchases.
d.
The presence of nonrecurring items among the firms being analysed.
D4)
Please explain why liquidity ratios, profitability ratios, and efficiency ratios are important for the banking, real state, and travel industry.
Chapter 3 Solutions
FUND. OF CORPORATE FIN. 18MNTH ACCESS
Ch. 3.1 - Prob. 3.1ACQCh. 3.1 - Prob. 3.1BCQCh. 3.2 - Prob. 3.2ACQCh. 3.2 - Name two types of standardized statements and...Ch. 3.3 - What are the five groups of ratios? Give two or...Ch. 3.3 - Given the total debt ratio, what other two ratios...Ch. 3.3 - Turnover ratios all have one of two figures as the...Ch. 3.3 - Profitability ratios all have the same figure in...Ch. 3.4 - Return on assets, or ROA, can be expressed as the...Ch. 3.4 - Return on equity, or ROE, can be expressed as the...
Ch. 3.5 - Prob. 3.5ACQCh. 3.5 - Prob. 3.5BCQCh. 3.5 - Prob. 3.5CCQCh. 3.5 - Prob. 3.5DCQCh. 3 - Prob. 3.1CTFCh. 3 - Prob. 3.2CTFCh. 3 - What is the correct formula for computing the...Ch. 3 - Prob. 3.5CTFCh. 3 - Current Ratio [LO2] What effect would the...Ch. 3 - Current Ratio and Quick Ratio [LO2] In recent...Ch. 3 - Prob. 3CRCTCh. 3 - Prob. 4CRCTCh. 3 - Prob. 5CRCTCh. 3 - Prob. 6CRCTCh. 3 - Prob. 7CRCTCh. 3 - Prob. 8CRCTCh. 3 - Prob. 9CRCTCh. 3 - Industry-Specific Ratios [LO2] There are many ways...Ch. 3 - Prob. 11CRCTCh. 3 - Prob. 12CRCTCh. 3 - Calculating Liquidity Ratios [LO2] SDJ, Inc., has...Ch. 3 - Calculating Profitability Ratios [LO2] Shelton,...Ch. 3 - Calculating the Average Collection Period [LO2]...Ch. 3 - Calculating Inventory Turnover [LO2] The Green...Ch. 3 - Calculating Leverage Ratios [LO2] Levine, Inc.,...Ch. 3 - Calculating Market Value Ratios [LO2] Makers Corp....Ch. 3 - DuPont Identity [LO4] If Roten Rooters, Inc., has...Ch. 3 - DuPont Identity [LO4] Zombie Corp. has a profit...Ch. 3 - Prob. 9QPCh. 3 - Prob. 10QPCh. 3 - Prob. 11QPCh. 3 - Equity Multiplier and Return on Equity [LO3] SME...Ch. 3 - Just Dew It Corporation reports the following...Ch. 3 - Prob. 14QPCh. 3 - Prob. 15QPCh. 3 - Prob. 16QPCh. 3 - Calculating Financial Ratios [LO2] Based on the...Ch. 3 - Using the DuPont Identity [LO3] Y3K, Inc., has...Ch. 3 - Days Sales in Receivables [LO2] A company has net...Ch. 3 - Ratios and Fixed Assets [LO2] The Caughlin Company...Ch. 3 - Profit Margin [LO4] In response to complaints...Ch. 3 - Return on Equity [LO2] Firm A and Firm B have...Ch. 3 - Calculating the Cash Coverage Ratio [LO2] Ugh...Ch. 3 - Cost of Goods Sold [LO2] W B Corp. has current...Ch. 3 - Prob. 25QPCh. 3 - Some recent financial statements for Smolira Golf...Ch. 3 - DuPont Identity [LO3] Construct the DuPont...Ch. 3 - Prob. 28QPCh. 3 - Market Value Ratios [LO2] Smolira Golf Corp. has...Ch. 3 - Tobins Q [LO2] What is Tobins Q for Smolira Golf?...Ch. 3 - Using the financial statements provided for SS...Ch. 3 - Mark and Todd agree that a ratio analysis can...Ch. 3 - Compare the performance of SS Air to the industry....
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- H5. Which of the following is not a criteria that's used to pick your trading comparables? Product/service offerings are similar Company size is similar Operates in similar geographic areas Valuation multiples are trading at similar ranges Similar revenue growth rate and margin profile Explain with details also explain wrong optionsarrow_forwardWhich of the following statements regarding financial ratios is most CORRECT? Group of answer choices: Industry average ratios are good benchmarks to compare performance for all firms in the same industry. Ratios are by themselves good indicators of a firm's strong or weak position. Electric utilities generally have low debt ratios because of their more stable revenue streams. Ratio analysis works better for conglomerate frms than for single-business firms. None of these statements are correct.arrow_forwardWhen converting dollar amounts on our financial statements to percentages for vertical analysis, what is it that makes this an easier way to compare companies to each other? A It provides a way for outside stakeholders to understand the numbers better in an easier format B It forces us to look closer at our financial statements to ensure we don't have missing amounts C It allows us to compare things based on growth or decline easier than comparing dollar amounts that could be vastly different values D It allows the analysis of numbers too large to comprehend by most stakeholdersarrow_forward
- Which of the following statements is CORRECT? 1. If two firms differ only in their use of debt¾i.e., they have identical assets, sales, operating costs, and tax rates¾but one firm has a higher debt ratio, the firm that uses more debt will have a higher profit margin on sales. 2. If two firms differ only in their use of debt¾i.e., they have identical assets, sales, operating costs, interest rates on their debt, and tax rates¾but one firm has a higher debt ratio, the firm that uses more debt will have a lower profit margin on sales. 3. c. A firm's use of debt will have no effect on its profit margin on sales. 4. If one firm has a higher debt ratio than another, we can be certain that the firm with the higher debt ratio will have the lower TIE ratio, as that ratio depends entirely on the amount of debt a firm uses. 5. The debt ratio as it is generally calculated makes an adjustment for the use of assets leased…arrow_forwardutilities versus Petroleum and natural gas 0.77 versus 1.31 food products (grocery stores)versus Apparel(retailers) 0.68 versus 1.09 Banking (Depository Institutions) versus Financial Trading 0.76 versus 1.09 (Security and commodity Brokers) For each matched pair of industries, describe factors that characterize a typical firm's business model in each industry. Describe how such factors would contribute to differences in systematic risk.arrow_forward81) Inadequacies of the existing system of financial ratios signify a need for a different approach to monitoring business performance. Of the following statements, which is NOT a shortcoming of financial ratios? a) financial measures are lagging indicators of business performance. b) financial ratios have a short-term orientation and emphasize the cash flow rather than the processes that contribute to cash flow. c) Financial ratios focus equally on the stockholders as on the customers, suppliers and employees. d) A and B e) A and B and Carrow_forward
- Q1. These statements true or false? explain in detail 1.To protect an industry, it is best when the Effective Rate of Protection is higher than the Normal Rate of Protection. 2. Immiserizing growth takes place when there is an increase in growth and trade of a country. 3. The formation of Free Trade Areas and Custom Unions leads to free trade between all countries.arrow_forwardWhich of the following statements regarding the current ratio is true? a.The current ratio is more useful than working capital in making comparisons across companies. b.The current ratio is not useful in making comparisons with industry averages. c.Working capital is more useful than the current ratio in making comparisons across companies. d.All of these statements are true.arrow_forward
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