1.

Financial analysis is to use tools and methods to analyze company’s information in order to
evaluate financial situation (including risk and operating quality) of this company.
2. I think this statement is false, profitability ratio are one of the most importance ratio when
analyzing the performance of the company, because of some reason:

3. Net profit margin > industry average

ROA > industry average
Net profit margin = Net income / Net revenue
ROA = Net income / Total assets
Both > industry average => This company will be better in controling cost than industry average,
and this company will have a better Total asset turnover ratio than industry average.

4.
a) Net cash from investing activities: -33k + 72k = 39k
b) Net cash from financing activities: -80k - 55k = -135k
c) Net cash from operating activities: -25k – 95k + 300k = 180k
Net increase or decrease in cash for the year: 39k – 135k + 180k = 84k
5.
ROE = 3%
D/E = 0.5 => EM = A/E = 1.5
R = 6% for debt
Tax = 35%
If: Net income = 3 -> Equity = 100 -> Asset = 150 -> Debt = 50 -> interest expense = 3
EBT = 3/65% = 4.6154
EBIT = 7.6154
 EBIT/Asset = 7.6154/150 = 5.08%
6.
NI = 2800k
Jan1: 10k share
Sep1: 30k share
Weighted average number of share outstanding = 10k + 30k x 1/3 = 20k
10k share of 6%, $1000 par preffered share were outstanding -> preferred dividend = 6% x
10k x 1000 = 600k
 Basic EPS = (2800k – 600k)/20k = $110
10k warrants which allow the holder to purchase 10 share of common stock for each warrant
at price $150/share, and average market price / share = $250 => if the holder use their
permission, company will receive $150x10k = 1500k and increase the total share outstanding
10k, and this company will buy back share with price $250 per share to anti-dilute EPS
 This company can buy: 1500k/250 = 6k share.
 10k-6k =4k share will outstanding.
 Diluted EPS = (2800k-600k)/(20k+4k)=$91.67
 Diluted EPS = 91.67