Subject: Business / Finance
. Ouyang Inc. had average days of sales outstanding of 13 days in the most recent fiscal years. Ouyang Inc. wants to improve it to match the industry average of 10 days next year. Sales in the most recent fiscal year were $200 million and the predicted sales of next year is $250 million. To achieve the goal of decreasing the collection period, the change in the average A/R balance that must occur is closest to:A) -$0.823 million
B) -$0.626 million
C) -$0.482 million
D) -$0.274 million
E) -$0.114 million2.
An analyst has the following data for Ouyang Inc.:Financial Information 2010 2011 2012
ROE 22% 20% 18%
Return on total assets 4% 6% 8%
Total asset turnover 2.1 1.8 1.4
The most appropriate conclusion based only on the above information is that over the past three years:A) net profit margin and financial leverage have both decreased;
B) net profit margin and financial leverage have both increased;
C) net profit margin has increased but financial leverage has decreased;
D) net profit margin has decreased but financial leverage has increased;
E) net profit margin and financial leverage have both remain unchanged.3.
A decomposition of ROE for Ouyang Inc. is as follows:Financial Information 2011 2012
ROE 0.131 0.131
Tax burden 0.34 0.34
Interest burden 0.82 0.70
EBIT margin 12% 14%
Asset turnover 1.7 1.7
Leverage 2.3 2.3
Which of the following is the most reasonable conclusion based on the above decomposition:A) The higher interest rate offset the improvement in profitability, leaving ROE unchanged.
B) The lower interest rate offset the improvement in profitability, leaving ROE unchanged.
C) The lower interest rate offset the improvement in profitability, leaving leverage unchanged.
D) The lower interest rate offset the improvement in efficiency, leaving leverage unchanged.
E) The higher interest rate offset the improvement in leverage, leaving efficiency unchanged.4. For the year of 2013, Ouyang Inc. has a P/E ratio of 2.3 and Huang Inc. has a P/E ratio of 5.8. The most reasonable conclusion based on the P/E ratios may be:A) Ouyang Inc. has a less capable CEO;
B) Huang Inc. has a better credit policy;
C) Ouyang Inc. has a higher market share;
D) investors are less confident in the future earnings power of Ouyang Inc.;
E) investors are happy with the social performance of Huang Inc.5. Which ratio would a firm most likely use to assess its ability to meet long-term obligations?A) activity ratios.
B) liquidity ratios.
C) solvency ratios.
D) current ratios.
E) gross profit margin.