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Questions (2 pts. each) Answers 1 In 2014, 2015 and 2016, how did IPG
Photonics (IPGP) generate most of its
cash flow? a) IPGP generated most of its cash flow through operations.
b) IPGP generated most of its cash flow by obtaining bank
loans.
c) IPGP generated most of its cash flow by issuing stock. 2 At the end of the 2016 fiscal year,
based on the Current Ratio and Quick
Ratio, which company (IPGP or its
closest competitor, Coherent, Inc.) was
in a better position to pay current
liabilities and pay them on time?
Another way to ask this question:
Which company will probably have an
easier time obtaining a short-term bank
loan?
Hint: Remember Coherent’s ratios (and
industry averages) are on the right of
the Ratios worksheet you completed in
Step 2. a) IPGP was in a better position than Coherent, Inc. to pay
current liabilities and pay them on time.
b) Coherent, Inc. was in a better position than IPGP to pay
current liabilities and pay them on time. 3 What method of inventory valuation
a) LIFO
does IPGP use for accounting
b) FIFO
purposes? (Refer to Note 1 in the Notes
c) Average Cost
to the Financial Statements.) 4 NOTE: Before answering this
question and the next several
questions, be sure to study the
“Chapter 9 Notes from your
Instructor” documents in the Canvas
module.
Round your answer to one decimal place.
How many days, on average, in 2016,
did it take IPGP to purchase, stock, and
sell its inventory? _______ days HINT: The Inventory Turnover
statistic is not the answer to this
question. Think of &quot;turnover&quot; as how
many times per year something is
happening, so Inventory Turnover is
the number of times per year, on
average, IPGP sells its entire inventory. Financial Analysis Project Page 1 5 Given the data you have, which of the
following statements is (are) true
regarding IPGP’s management of
inventory? a) The ratios indicate IPGP has been efficiently managing its
inventory, as compared to competitors in the same
industry.
b) Comparing 2016 to 2015, the percent increase in IPGP’s
Cost of Sales was larger than the percent increase in its
Inventory.
c) The average number of days it took IPGP to purchase,
stock, and sell its inventory increased from 2015 to 2016.
d) IPGP took significantly longer than competitors
(Coherent and the industry averages) to purchase, stock,
and sell its inventory.
e) A, B, and C are true.
f) A, B, C, and D are true.
g) B, C and D are true.
h) C and D are true. 6 Remember that “net” means something
has been subtracted. What did IPGP
subtract from Accounts Receivable? a) The cumulative amount of depreciation recorded in the
past
b) The estimated amount of money IPGP will not be able to
collect from customers who owe IPGP for products and
services already delivered to the customers
c) The amount of products customers have returned for
refunds
d) The amount of discounts IPGP’s customers have been
granted because of paying their invoices early
e) Sales Returns and Allowances and Sales Discounts 7 How many days, on average in 2016,
did it take IPGP to collect payments
from customers for products and
services IPGP had provided to them? 8 Given the data you have, which of the
following statements is (are) true
regarding IPGP’s management of
accounts receivable?
Hint: Remember to look on the Ratios
worksheet at Coherent and the industry
competition. Financial Analysis Project Round your answer to one decimal place.
_______ days
a) Comparing 2016 to 2015, the percent increase in IPGP’s
Net Sales was larger than the percent increase in its
Accounts Receivable.
b) If IPGP’s typical credit terms are 2/10, n/30, receivables
need to be further analyzed to find out why they are
taking longer to collect than they should be.
c) If IPGP’s credit terms are typically something such as
2/20, n/60, the company’s collection of receivables is on
track.
d) In 2016, on average, IPGP collected its receivables more
slowly than its competitors collected their receivables.
e) A, B, and C are true.
f) A, B, C, and D are true. Page 2 9 In 2016, on average, how many days
did it take IPGP to pay its vendors
(suppliers)? Round your answer to one decimal place. 10 How does the amount of time IPGP
took to collect from its customers
compare to the amount of time it took
to pay its own Accounts Payable to its
vendors? a) IPGP collected from customers much more quickly than it
paid its own bills.
b) IPGP paid its own bills much more quickly than it
collected from customers.
c) IPGP took about the same amount of time to collect from
customers as it took to pay its vendors. 11 Did IPGP pay its own Accounts
a) IPGP paid its vendors more quickly than its competitors
Payable more quickly or less quickly
paid their vendors.
than its competitors paid their vendors? b) IPGP paid its vendors less quickly than its competitors
(Competitors include Coherent, Inc.
paid their vendors.
and the industry averages.)
c) IPGP and its competitors took about the same amount of
time to pay their vendors. 12 What reason(s) might IPGP have for
maintaining a low Days Payables
Outstanding? a) Vendors might offer better credit terms in order to keep
IPGP as a customer.
b) Vendors might offer better product prices in order to keep
IPGP as a customer.
c) By paying early, IPGP can take advantage of cash
discounts.
d) All of the above are true.
e) None of the above are true. 13 If typical credit terms for suppliers to
the Semiconductor and Other
Electronic Components industry are
2/10, n/30, do IPGP’s vendors
(suppliers) have any need for concern
about being paid on time? a) Yes, IPGP’s vendors should be concerned about being
paid on time. The company’s Current Ratio and Quick
Ratio are too high, and Days’ Sales in Receivables is well
above 30 days.
b) Yes, IPGP’s vendors should be concerned about being
paid on time. The company’s Current Ratio and Quick
Ratio are too low, and Days Payables Outstanding is
below 30 days.
c) IPGP’s vendors have no need to worry about being paid
on time. The company’s Current Ratio and Quick Ratio
are well above industry averages, and Day’s Sales in
Receivables is well above 30 days.
d) IPGP’s vendors have no need to worry about being paid
on time. The company’s Current Ratio and Quick Ratio
are well above industry averages, and Days Payables
Outstanding is below 30 days. Financial Analysis Project _______ days Page 3 14 Considering the Cash Conversion
Cycles in 2015 and 2016, which of the
following statements is (are) true? a) In 2016, as compared to 2015, IPGP increased the number
of days between paying for products and collecting from
customers.
b) Because of the increase in IPGP’s cash conversion cycle
from 2015 to 2016, in general, IPGP increased the amount
of working capital needed to run its business.
c) In 2016, as compared to 2015, IPGP improved its overall
working capital management.
d) Overall, IPGP’s competitors managed their working
capital more efficiently than IPGP managed its working
capital.
e) When comparing IPGP to its competitors, inventory
management seems to be the area that could create the
most improvement in IPGP’s working capital
management.
f) B and C are true.
g) A, B, D, and E are true.
h) A, B, C, D, and E are true. 15 Calculate the dollar amount of increase
or decrease in IPGP’s working capital
from the end of 2015 to the end of
2016. Include all the zeros in your answer. Remember to check the
financial statements to see if the numbers are in thousands
or millions (or neither).
__________________ (Increase or decrease) 16 Looking at IPGP’s and Coherent, Inc.’s
Statements of Cash Flows, which of
the following statements is (are) true
regarding the companies’ cash
investment in property and equipment
in 2014, 2015, and 2016? a) IPGP brought in more money from selling property and
equipment than it spent buying and/or improving property
and equipment.
b) Each year, IPGP invested more cash in new property and
equipment than the amount of depreciation for existing
property and equipment. (See the top section of the
Statement of Cash Flows to see depreciation for each
year.)
c) Each year, as compared to the previous year, IPGP
steadily decreased the amount of money it invested in
property and equipment.
d) Each year, IPGP invested more money in property and
equipment than Coherent, Inc. invested in property, plant,
and equipment.
e) A and C are true.
f) B and D are true. Financial Analysis Project Page 4 17 Of the fixed assets IPGP owned at the
end of 2016, which fixed asset
category had IPGP spent the most
money on?
(Hint: Remember, when you cannot see
the detail you need in the financial
statements, look in the Notes to the
Financial Statements. You will find a
breakdown of IPGP’s property, plant,
and equipment in Note 4.) a) Buildings
b) Machinery and equipment
c) Office furniture and fixtures
d) Construction in progress 18 As an IT manager, you know you will
need to make equipment and software
purchases. Which of the following
statements is (are) true regarding
IPGP’s ability to pay for, and attitude
toward, purchasing new equipment? 19 What method of depreciation does
IPGP use for book (financial
a) Straight-line
accounting) purposes? (Remember,
b) Double declining balance
the Notes to the Financial Statements
give you this type of information. Look c) MACRS
for “Significant Accounting Policies”.) 20 In terms of total assets, which company a) IPGP grew more than Coherent, Inc. did.
(IPGP or Coherent) grew more in the
b) Coherent, Inc. grew more than IPGP did.
2016 fiscal year (as compared to
2015)? 21 While reviewing the liability section of
the balance sheet, you notice IPGP has
Accrued Expenses. What kinds of
things might be included in this line? Financial Analysis Project a) IPGP appears to have an excess of cash and relatively few
liabilities.
b) IPGP appears to be very profitable as compared to its
competitors.
c) IPGP appears to be willing to invest in equipment.
d) All of the above are true. a) Items such as insurance plans and office supplies that
IPGP had paid for but had not used up prior to the balance
sheet date
b) Items such as employee wages that were earned but that
IPGP had not paid for as of the balance sheet date
c) Items such as depreciation on equipment that was
purchased in the past but had not been fully depreciated
as of the balance sheet date
d) Items such as lawsuit expenses that might possibly occur,
but for which the amount had not been determined as of
the balance sheet date Page 5 22 Remember that many companies use
the term &quot;Long-Term Debt&quot; or “LongTerm Obligations” when referring to
bank loans. The current portion is
shown under Current Liabilities, and
the long-term portion is shown as part
of long-term liabilities.
Include all the zeros in your answer.
What is the total amount IPGP owed to
banks (current portion plus long-term
portion) at the end of 2016? _________________________ 23 Considering the Ratio of Liabilities to
Stockholders’ Equity, has IPGP used
more debt (loans) or more equity
(selling stock and/or using its own
earnings) to finance its operations? 24 Considering the Ratio of Liabilities to
Total Assets and the Ratio of Liabilities
to Stockholders’ Equity, for 2016, had
IPGP used more or less debt to finance a) IPGP had used a higher portion of debt than its
its operations than its competitors had
b) IPGP had used a lower portion of debt than its competitors
used? (Competitors include Coherent
and the industry averages.) 25 Comparing IPGP’s and Coherent’s
Ratio of Fixed Assets to Long-Term
Liabilities, are noteholders (creditors
such as bankers) likely to feel more
comfortable extending additional longterm loans to IPGP or to Coherent,
Inc.? 26 Which statement best describes the
trend in IPGP’s revenues and its
closest competitor, Coherent, Inc.’s,
revenues over 2014, 2015, and 2016? Financial Analysis Project a) IPGP has used significantly more debt than equity to
finance its operations.
b) IPGP has used significantly more equity than debt to
finance its operations. a) Noteholders are likely to feel more comfortable extending
additional long-term loans to IPGP than to Coherent, Inc.
b) Noteholders are likely to feel more comfortable extending
additional long-term loans to Coherent, Inc than to IPGP.
a) IPGP’s revenues (in dollars) steadily increased.
Coherent’s revenues also steadily increased. In each of
three years, IPGP’s revenues were greater than
Coherent’s.
b) IPGP’s revenues (in dollars) steadily increased.
Coherent’s revenues also steadily increased. In each of
the past three years, IPGP’s revenues were less than
Coherent’s.
c) IPGP’s revenues (in dollars) steadily increased.
Coherent’s revenues decreased from 2014 to 2015, but
increased in 2016. In each of the three years, IPGP’s
revenues were greater than Coherent’s.
d) IPGP’s revenues (in dollars) steadily increased.
Coherent’s revenues also steadily increased. In 2015,
IPGP’s revenues surpassed Coherent’s revenues, and
IPGP’s revenues were greater than Coherent’s again in
2016.
Page 6 27 What was IPGP’s percent increase in
revenues from 2015 to 2016? Round your answer to one decimal place.
_____ % 28 Which statement is correct regarding
the trend in IPGP’s net income and
Coherent, Inc.’s, net income over
2014, 2015, and 2016? a) IPGP’s net income steadily increased, both in dollars and
as a percent of revenues.
b) Coherent’s net income steadily decreased, both in dollars
and as a percent of revenues.
c) In each of the three years, IPGP’s net income was greater
than Coherent’s net income, both in dollars and as a
percent of revenues.
d) In each of the three years, IPGP’s net income in dollars
was more than Coherent’s, but IPGP’s net income as a
percent of revenues was less than Coherent’s. 29 In 2014, 2015, and 2016, what was
IPGP’s most costly item?
(Hint: Look at the income statements.) a) IPGP’s cost of products and services provided to
customers
b) Sales and marketing expenses
c) Research and development expenses
d) General and administrative expenses
e) Interest expense
f) Income taxes 30 On average, for each dollar IPGP spent
on the cost of products and services it
sold in 2016, how many cents did it
add on to establish its selling price?
(In other words, in 2016, on average,
for every dollar in cost, how many
cents did IPGP mark up its products
and services?) Round each answer to the nearest one-tenth of one cent (one
decimal place) – for example, 83.8 cents. If the markup is
greater than \$1.00, still write it in cents. For example, a
markup of \$1.346 would be 134.6 cents. _______ cents For every dollar in cost, on average,
how many cents did Coherent, Inc.
mark up its products and services? _______ cents For every dollar in cost, on average,
how many cents did all companies in
the industry mark up their products and
services? _______ cents NOTE: If you are having trouble with
this and the next two questions, look
back at the Chapter 4 Analysis
Questions. To see the correct answers
to those questions, go to the
CENGAGE gradebook and click on
your score for each question.
Financial Analysis Project Page 7 31 In 2016, on average, for every dollar of
product and service sold, how many
cents in profit did IPGP and Coherent
make after accounting for their cost of
the products and services sold? Round each answer to the nearest one-tenth of one cent (one
decimal place).
IPGP (year ended 12/31/2016): ______ cents
Coherent, Inc. (year ended 10/1/2016): ______ cents 32 In 2016, on average, for every dollar of
product and service sold, how many
Round each answer to the nearest one-tenth of one cent (one
cents in profit did IPGP and Coherent,
decimal place).
Inc. make after accounting for all
expenses (product costs, selling and
IPGP (year ended 12/31/2016): ______ cents
administrative expenses, interest, taxes,
and other)?
Coherent, Inc. (year ended 10/1/2016): ______ cents 33 How did IPGP’s Gross Profit Margin,
Operating Profit Margin, and Net
Profit Margin for 2016 compare to
2015? a) IPGP’s Gross Profit Margin, Operating Profit Margin, and
Net Profit Margin were all better in 2016 than in 2015.
b) IPGP’s Gross Profit Margin, Operating Profit Margin, and
Net Profit Margin were all worse in 2016 than in 2015.
c) Two of IPGP’s ratios were better in 2016 than in 2015;
one ratio was worse in 2016.
d) One of IPGP’s ratios was better in 2016 than in 2015; the
other two ratios were worse in 2016. 34 How did IPGP’s Gross Profit Margin,
Operating Profit Margin, and Net
Profit Margin for 2016 compare to
Coherent’s and the industry averages? a) IPGP’s 2016 Gross Profit Margin, Operating Profit
Margin, and Net Profit Margin were all better than
Coherent’s and the industry averages.
b) IPGP’s 2016 Gross Profit Margin, Operating Profit
Margin, and Net Profit Margin were all worse than
Coherent’s and the industry averages.
c) Two of IPGP’s 2016 ratios were better than Coherent’s
and the industry averages; one ratio was worse.
d) One of IPGP’s 2016 ratios was better than Coherent’s and
the industry averages; the other two ratios were worse. 35 For IPGP, which of the following types
of expenses increased the most in
2016, as a percent increase from 2015? a) Sales and marketing expenses
b) Research and development expenses
c) General and administrative expenses 36 In a high-tech industry, research and
development of new products is
essential. In 2016 and 2015, how did
IPGP’s research and development costs
compare to Coherent’s? a) IPGP spent more on research and development than
Coherent did, both in dollars and as a percent of revenues.
b) IPGP spent less on research and development than
Coherent did, both in dollars and as a percent of revenues.
c) IPGP spent less dollars on research and development than
Coherent did, but as a percent of revenues, IPGP spent
more on research and development than Coherent did. Financial Analysis Project Page 8 37 In order to be profitable, it is important
for a company to keep its selling,
general, and administrative expenses
under control. In 2016 and 2015, how
did IPGP’s selling, general, and
administrative expenses compare to
Coherent’s?
Notice, you will need to combine two
lines for IPGP (Sales and marketing,
and General and administrative).
Coherent’s are all on one line. a) IPGP spent significantly more on selling, general, and
administrative expenses than IPGP did, both in dollars
and as a percent of revenues.
b) IPGP spent significantly less on selling, general, and
administrative expenses than Coherent did, both in dollars
and as a percent of revenues.
c) IPGP spent less dollars on selling, general, and
administrative expenses than Coherent did, but as a
percent of revenues, IPGP spent more on selling, general,
and administrative expenses than Coherent did. 38 Based on the Fixed Asset Turnover
ratio, in 2016, was IPGP more or less
effective than in 2015 at using fixed
assets to generate sales? a) In 2016, IPGP was more effective than in 2015 at
generating sales from the use of its fixed assets.
b) In 2016, IPGP was less effective than in 2015 at
generating sales from the use of its fixed assets. 39 Considering the Ratio of Net Sales to
Assets, in 2016 was IPGP more or less
effective than its competitors at using
its total assets to generate sales? 40 41 a) In 2016, IPGP was more effective than both Coherent,
Inc. and the industry averages at using total assets to
generate sales.
b) In 2016, IPGP was less effective than both Coherent, Inc.
and the industry averages at using total assets to generate
sales.
Considering the Rate Earned on Total
a) In 2016, IPGP was significantly more effective than both
Assets (also called Return on Assets, or
Coherent, Inc. and the industry averages at using assets to
ROA), in 2016 was IPGP more or less
generate profits.
effective than its competitors at using
b) In 2016, IPGP was less effective than both Coherent, Inc.
its total assets to generate profits?
and the industry averages at using assets to generate
profits.
c) In 2016, IPGP was less effective than Coherent, Inc. at
using assets to generate profits, but significantly more
effective than the industry averages.
What type(s) of stock has IPGP issued
to stockholders? Financial Analysis Project a)
b)
c)
d) Common stock
Preferred stock
Common and preferred stock
The financial statements do not show what kind of stock
has been issued. Page 9 42 Considering the Rate Earned on
a) Stockholders would be concerned about the decrease in
Stockholders’ Equity and Earnings Per
the Rate Earned on Stockholders’ Equity, because it was
Share, are IPGP’s stockholders likely to
caused by a decrease in net income in 2016. However,
be happy with IPGP’s ratios, compared
they would be happy that IPGP’s Earnings per Share
to the competition (Coherent and the
continues to be higher than Coherent’s.
industry averages)?
b) Stockholders probably are happy that IPGP’s Rate Earned
on Stockholders’ Equity and Earnings per Share continue
to be higher than competitors’, including Coherent, which
is IPGP’s closest competitor.
c) Stockholders would not care about the Rate Earned on
Stockholders’ Equity or the Earnings per Share, because
investors tend to ignore both ratios. 43 Considering IPGP’s most recent Price- a) It appears investors expect IPGP’s future earnings to be
Earnings (P/E) Ratio, do investors
more favorable than Coherent’s future earnings and the
appear to expect IPGP’s future earnings
industry on average.
to be more or less favorable than its
b) It appears investors expect IPGP’s future earnings to be
competitors’ future earnings, on
less favorable than Coherent’s future earnings and the
average?
industry on average.
c) It appears investors expect IPGP’s future earnings to be
less favorable than Coherent’s future earnings, but
slightly more favorable than the industry on average. 44 What was IPGP’s largest asset at the
end of 2016 and the end of 2015? a)
b)
c)
d)
e) 45 When companies have enough cash
and enough retained earnings,
typically, shareholders expect to
receive a return on their investment in
the form of dividends. They also
expect dividends to be consistent or to
increase from year to year. Which
statement best reflects what IPGP’s
shareholders most likely think about
the dividends they received in 2016
and 2015? a) IPGP’s shareholders probably were happy they received
dividends in 2016 and 2015.
b) IPGP’s shareholders probably understand that the
company could not pay dividends in 2016 or 2015 due to
low cash balances in each of those years.
c) IPGP’s shareholders probably wonder why they did not
receive dividends in 2016 or 2015, given that the
company’s cash balances and retained earnings both
increased in each of those years, and given that the
company had so much cash in 2016 and 2015, it even
purchased more short-term investments. Financial Analysis Project Cash and cash equivalents
Receivables
Inventories
Prepaid expenses
Property, plant, and equipment Page 10