Sales per share = $18m / 3m = $6 

P/S ratio = 42 / 6 = 7

Since the stock’s P/S multiple is the same as that of the benchmark, it is said to be fairly valued. One way this question could be made more complex on exam day is to give you income statement data that would require you to solve for reported sales, but here it is given. 

The statement of cash flows provides information about a company’s cash receipts and cash payments during the accounting period Other financial statements are used to analyze revenues, expenses, assets, liabilities, and stockholders’ equity so don’t be distracted by those. The statement of cash flows summarizes transactions affecting cash; it is the balance sheet that states the company’s financial position at a point in time. 

Common size financial statements compare the mix of assets, liabilities, capital, revenue, and expenses within a given industry without respect to relative size.  Common-size financial statements present items in a financial statement as percentages of a common base. Comparison among firms in the same industry is made possible despite differences in size. Comparison of firms in different industries does have drawbacks using this method because the optimum mix of assets, liabilities, etc. will vary from industry to industry.

Payroll expenses are a current liability and don’t appear on the income statement. All other items may appear on the income statement if required. What makes this the correct answer is “payable” meaning it will carry over to a future period and isn’t on the income statement. 

Operating cash flow = net income + noncash expenses – noncash revenues. In this case 150 + 55 – 30 – 25 = $150 The other answer choices are combinations of the right math but with the wrong operation. Be ready to have the incorrect answers appear in the answer choices on test day. 

The correct relationship is gross profit margin will always exceed operating profit margin which will always exceed the net profit margin. The general relationships to remember are 1) gross profit = net sales – COGS. 2)operating profit = gross profit – sales & general expenses = EBDIT .Income 3)earnings after EBDIT = operating profit – depreciation – interest expense – taxes 

To write off inventory, we debit a loss account on the income statement and reduce inventory on the balance sheet. Therefore, the write off affects the current assets but not the quick assets (cash, net receivables, and marketable securities).

The total that may be raised under a Regulation A Tier 2 offering is $75,000,000 over a 12 month period.

The management of the target company has 10 business days to communicate its opinion to shareholders

Common-size analysis involves stating all the balance sheet items as a percentage of total assets. This makes it easier to analyze companies of different sizes. It also allows a company that is growing/shrinking to compare balance sheets from year to year.