Solved: In recent years, several manufacturing companies have reported the cash flow from the sale of Treasury securities in the cash from operations section of the statement of cash flows. What is the problem with this practice? Is there any situation in which this practice would be acceptable

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.

Solved: So-called same-store sales are a very important measure for companies as diverse as McDonald’s and Sears. As the name suggests, examining same-store sales means comparing revenues from the same stores or restaurants at two different points in time. Why might companies focus on same-store sales rather than total sales?

Solved: Specialized ratios are sometimes used in specific industries. For example, the so-called book-to-bill ratio is closely watched for semiconductor manufacturers. A ratio of .93 indicates that for every $100 worth of chips shipped over some period, only $93 worth of new orders were received.  In November 2016, the semiconductor equipment industry’s book-to-bill ratio was .96, compared to .91 during the month of October 2016.

Solved: Why is the DuPont identity a valuable tool for analyzing the performance of a firm? Discuss the types of information it reveals compared to ROE considered by itself.

Explain what peer group analysis is. Solved: As a financial manager, how could you use the results of peer group analysis to evaluate the performance of your firm? How is a peer group different from an aspirant group?

Solved: What types of information do common-size financial statements reveal about the firm? What is the best use for these common-size statements? What purpose do common-base year statements have? When would you use them?

Solved: Financial Ratios [LO2] Fully explain the kind of information the following financial ratios provide about a firm: a. Quick ratio

Solved: Explain what it means for a firm to have a current ratio equal to .50. Would the firm be better off if the current

Solved: What effect would the following actions have on a firm’s current ratio? Assume that net working capital is positive.
a. Inventory is purchased.
b. A supplier is paid