There was a bit of concern about one of RBL's newer entities - RBL Paving Company. Management wants you to review the two financial statements below and give your analysis of the company's performance. RBL Paving Company Current Assets: Cash Assets Accounts Receivable Inventory Total Current Assets Fixed Assets: Property, Plant & Equipment Less: Accumulated Depreciation Net Fixed Assets Total Assets Current Liabilities: 200,000 Accounts Payable 300,000 Notes Payable 800,000 1,300,000 Total Current Liabilities Owners' Equity: 2,200,000 Common Stock ($1 Par) Liabilities 600,000 Capital Surplus 1,600,000 Retained Earnings 2,900,000 Total Owners' Equity Sales Less: Cost of Goods Sold RBL Paving Company Income Statement for Year Ending December 31, 2021 Total Liabilities and Owners' Equity Less: Administrative Expenses Less Depreciation Earnings Before Interest and Taxes Less: Interest Expense Taxable Income Less: Taxes Net Income Dividends Addition to Retained Earnings 3,400,000 2,700,000 700,000 682,000 (682,000) 120,000 (802,000) (280,000) (522,000) 0 (522,000) 700,000 600,000 1,300,000 600,000 100,000 100,000 800,000 2,900,000

Metropolitan Water Utilities purchases surface water from Elephant Butte Irrigation District at a cost of $100,000 per month in the months of February through September. Instead of paying monthly, the utility makes a single payment of $800,000 at the end of each calendar year for the water it used. The delayed payment essentially represents a subsidy by Elephant Butte Irrigation District to the water utility. At an interest rate of 0.25% per month, what is the amount of the subsidy?

Business ratios of financial statements are generally categorized as one of the following areas, EXCEPT Select one: a. Leverage b. Profitability c. Net Present Value d. Liquidity e. Efficiency (or Activity)

Which of the following ratios is used to analyze a company's liquidity? a. Inventory turnover ratio b. Earnings per share c. Return on assets ratio d. Asset turnover ratio

Which of the following ratios would a lender find most useful in monitoring a borrower's ability to make loan payments? () PE ratio Return on assets Total asset turnover Inventory turnover () Cash coverage ratio Previous Page Next Page Page 6

12. Which two ratios multiplied by each other equal Return on Total Assets? (A) Profit Margin (B) Return on Equity (C) Current Ratio (D) Price Earnings Ratio (E) Total Asset Turnover

5. Know the calculations for all of the following ratios (see ratio sheet that can be used on the exam) and know the category (listed in Question 4) they fall in: Formula Category/Use Ratio Working Capital Current Assets - Current Liabilities Net credit sales/Average Accounts Receivable Turnover accounts receivable Asset Turnover Net sales/Average total assets Net income/Average total stockholders' equity Total liabilities/Total stockholders equity Net income/Net sales Return on Equity (ROE) Debt to equity Return on Sales (ROS) (also known as Net Margin Current Assets/Current Liabilities Cost of goods sold/Average inventory Quick assets/Current Current Ratio Inventory Turnover Quick Ratio liabilities Dividend Yield Dividends per share/Market price per share Net earnings available for common stock/Number of outstanding common shares Net income/Average total Earnings per Share (EPS) Return on Investment (ROI) assets Price Earnings Ratio (P/E) Market price per share/Earnings per share…

_______ ratios are used to measure the speed in which various assets are converted into sales or cash. A Debt (aka Leverage) B Efficiency (aka working capital) C Profitability C Coverage

Current assets DIVIDED BY current liabilities is the Current Ratio Net Worth Ratio Working Capital