29 Jul QUESTIONS (2 PTS. EACH) ANSWERS 1 IN 2014,
Questions (2 pts. each) Answers 1 In 2014, 2015 and 2016, how did IPGPhotonics (IPGP) generate most of itscash flow? a) IPGP generated most of its cash flow through operations.b) IPGP generated most of its cash flow by obtaining bankloans.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 QuickRatio, which company (IPGP or itsclosest competitor, Coherent, Inc.) wasin a better position to pay currentliabilities and pay them on time?Another way to ask this question:Which company will probably have aneasier time obtaining a short-term bankloan?Hint: Remember Coherents ratios (andindustry averages) are on the right ofthe Ratios worksheet you completed inStep 2. a) IPGP was in a better position than Coherent, Inc. to paycurrent liabilities and pay them on time.b) Coherent, Inc. was in a better position than IPGP to paycurrent liabilities and pay them on time. 3 What method of inventory valuationa) LIFOdoes IPGP use for accountingb) FIFOpurposes? (Refer to Note 1 in the Notesc) Average Costto the Financial Statements.) 4 NOTE: Before answering thisquestion and the next severalquestions, be sure to study theChapter 9 Notes from yourInstructor documents in the Canvasmodule.Round your answer to one decimal place.How many days, on average, in 2016,did it take IPGP to purchase, stock, andsell its inventory? _______ days HINT: The Inventory Turnoverstatistic is not the answer to thisquestion. Think of “turnover” as howmany times per year something ishappening, so Inventory Turnover isthe number of times per year, onaverage, IPGP sells its entire inventory. Financial Analysis Project Page 1 5 Given the data you have, which of thefollowing statements is (are) trueregarding IPGPs management ofinventory? a) The ratios indicate IPGP has been efficiently managing itsinventory, as compared to competitors in the sameindustry.b) Comparing 2016 to 2015, the percent increase in IPGPsCost of Sales was larger than the percent increase in itsInventory.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 somethinghas been subtracted. What did IPGPsubtract from Accounts Receivable? a) The cumulative amount of depreciation recorded in thepastb) The estimated amount of money IPGP will not be able tocollect from customers who owe IPGP for products andservices already delivered to the customersc) The amount of products customers have returned forrefundsd) The amount of discounts IPGPs customers have beengranted because of paying their invoices earlye) Sales Returns and Allowances and Sales Discounts 7 How many days, on average in 2016,did it take IPGP to collect paymentsfrom customers for products andservices IPGP had provided to them? 8 Given the data you have, which of thefollowing statements is (are) trueregarding IPGPs management ofaccounts receivable?Hint: Remember to look on the Ratiosworksheet at Coherent and the industryaverages when asked about IPGPscompetition. Financial Analysis Project Round your answer to one decimal place._______ daysa) Comparing 2016 to 2015, the percent increase in IPGPsNet Sales was larger than the percent increase in itsAccounts Receivable.b) If IPGPs typical credit terms are 2/10, n/30, receivablesneed to be further analyzed to find out why they aretaking longer to collect than they should be.c) If IPGPs credit terms are typically something such as2/20, n/60, the companys collection of receivables is ontrack.d) In 2016, on average, IPGP collected its receivables moreslowly 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 daysdid it take IPGP to pay its vendors(suppliers)? Round your answer to one decimal place. 10 How does the amount of time IPGPtook to collect from its customerscompare to the amount of time it tookto pay its own Accounts Payable to itsvendors? a) IPGP collected from customers much more quickly than itpaid its own bills.b) IPGP paid its own bills much more quickly than itcollected from customers.c) IPGP took about the same amount of time to collect fromcustomers as it took to pay its vendors. 11 Did IPGP pay its own Accountsa) IPGP paid its vendors more quickly than its competitorsPayable more quickly or less quicklypaid 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 oftime to pay their vendors. 12 What reason(s) might IPGP have formaintaining a low Days PayablesOutstanding? a) Vendors might offer better credit terms in order to keepIPGP as a customer.b) Vendors might offer better product prices in order to keepIPGP as a customer.c) By paying early, IPGP can take advantage of cashdiscounts.d) All of the above are true.e) None of the above are true. 13 If typical credit terms for suppliers tothe Semiconductor and OtherElectronic Components industry are2/10, n/30, do IPGPs vendors(suppliers) have any need for concernabout being paid on time? a) Yes, IPGPs vendors should be concerned about beingpaid on time. The companys Current Ratio and QuickRatio are too high, and Days Sales in Receivables is wellabove 30 days.b) Yes, IPGPs vendors should be concerned about beingpaid on time. The companys Current Ratio and QuickRatio are too low, and Days Payables Outstanding isbelow 30 days.c) IPGPs vendors have no need to worry about being paidon time. The companys Current Ratio and Quick Ratioare well above industry averages, and Days Sales inReceivables is well above 30 days.d) IPGPs vendors have no need to worry about being paidon time. The companys Current Ratio and Quick Ratioare well above industry averages, and Days PayablesOutstanding is below 30 days. Financial Analysis Project _______ days Page 3 14 Considering the Cash ConversionCycles in 2015 and 2016, which of thefollowing statements is (are) true? a) In 2016, as compared to 2015, IPGP increased the numberof days between paying for products and collecting fromcustomers.b) Because of the increase in IPGPs cash conversion cyclefrom 2015 to 2016, in general, IPGP increased the amountof working capital needed to run its business.c) In 2016, as compared to 2015, IPGP improved its overallworking capital management.d) Overall, IPGPs competitors managed their workingcapital more efficiently than IPGP managed its workingcapital.e) When comparing IPGP to its competitors, inventorymanagement seems to be the area that could create themost improvement in IPGPs working capitalmanagement.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 increaseor decrease in IPGPs working capitalfrom the end of 2015 to the end of2016. Include all the zeros in your answer. Remember to check thefinancial statements to see if the numbers are in thousandsor millions (or neither).__________________ (Increase or decrease) 16 Looking at IPGPs and Coherent, Inc.sStatements of Cash Flows, which ofthe following statements is (are) trueregarding the companies cashinvestment in property and equipmentin 2014, 2015, and 2016? a) IPGP brought in more money from selling property andequipment than it spent buying and/or improving propertyand equipment.b) Each year, IPGP invested more cash in new property andequipment than the amount of depreciation for existingproperty and equipment. (See the top section of theStatement of Cash Flows to see depreciation for eachyear.)c) Each year, as compared to the previous year, IPGPsteadily decreased the amount of money it invested inproperty and equipment.d) Each year, IPGP invested more money in property andequipment 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 theend of 2016, which fixed assetcategory had IPGP spent the mostmoney on?(Hint: Remember, when you cannot seethe detail you need in the financialstatements, look in the Notes to theFinancial Statements. You will find abreakdown of IPGPs property, plant,and equipment in Note 4.) a) Buildingsb) Machinery and equipmentc) Office furniture and fixturesd) Construction in progress 18 As an IT manager, you know you willneed to make equipment and softwarepurchases. Which of the followingstatements is (are) true regardingIPGPs ability to pay for, and attitudetoward, purchasing new equipment? 19 What method of depreciation doesIPGP use for book (financiala) Straight-lineaccounting) purposes? (Remember,b) Double declining balancethe Notes to the Financial Statementsgive you this type of information. Look c) MACRSfor 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 theb) Coherent, Inc. grew more than IPGP did.2016 fiscal year (as compared to2015)? 21 While reviewing the liability section ofthe balance sheet, you notice IPGP hasAccrued Expenses. What kinds ofthings might be included in this line? Financial Analysis Project a) IPGP appears to have an excess of cash and relatively fewliabilities.b) IPGP appears to be very profitable as compared to itscompetitors.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 thatIPGP had paid for but had not used up prior to the balancesheet dateb) Items such as employee wages that were earned but thatIPGP had not paid for as of the balance sheet datec) Items such as depreciation on equipment that waspurchased in the past but had not been fully depreciatedas of the balance sheet dated) Items such as lawsuit expenses that might possibly occur,but for which the amount had not been determined as ofthe balance sheet date Page 5 22 Remember that many companies usethe term “Long-Term Debt” or LongTerm Obligations when referring tobank loans. The current portion isshown under Current Liabilities, andthe long-term portion is shown as partof long-term liabilities.Include all the zeros in your answer.What is the total amount IPGP owed tobanks (current portion plus long-termportion) at the end of 2016? _________________________ 23 Considering the Ratio of Liabilities toStockholders’ Equity, has IPGP usedmore debt (loans) or more equity(selling stock and/or using its ownearnings) to finance its operations? 24 Considering the Ratio of Liabilities toTotal Assets and the Ratio of Liabilitiesto Stockholders Equity, for 2016, hadIPGP used more or less debt to finance a) IPGP had used a higher portion of debt than itscompetitors had.its operations than its competitors hadb) IPGP had used a lower portion of debt than its competitorsused? (Competitors include Coherenthad.and the industry averages.) 25 Comparing IPGPs and CoherentsRatio of Fixed Assets to Long-TermLiabilities, are noteholders (creditorssuch as bankers) likely to feel morecomfortable extending additional longterm loans to IPGP or to Coherent,Inc.? 26 Which statement best describes thetrend in IPGPs revenues and itsclosest competitor, Coherent, Inc.s,revenues over 2014, 2015, and 2016? Financial Analysis Project a) IPGP has used significantly more debt than equity tofinance its operations.b) IPGP has used significantly more equity than debt tofinance its operations. a) Noteholders are likely to feel more comfortable extendingadditional long-term loans to IPGP than to Coherent, Inc.b) Noteholders are likely to feel more comfortable extendingadditional long-term loans to Coherent, Inc than to IPGP.a) IPGPs revenues (in dollars) steadily increased.Coherents revenues also steadily increased. In each ofthree years, IPGPs revenues were greater thanCoherents.b) IPGPs revenues (in dollars) steadily increased.Coherents revenues also steadily increased. In each ofthe past three years, IPGPs revenues were less thanCoherents.c) IPGPs revenues (in dollars) steadily increased.Coherents revenues decreased from 2014 to 2015, butincreased in 2016. In each of the three years, IPGPsrevenues were greater than Coherents.d) IPGPs revenues (in dollars) steadily increased.Coherents revenues also steadily increased. In 2015,IPGPs revenues surpassed Coherents revenues, andIPGPs revenues were greater than Coherents again in2016.Page 6 27 What was IPGPs percent increase inrevenues from 2015 to 2016? Round your answer to one decimal place._____ % 28 Which statement is correct regardingthe trend in IPGPs net income andCoherent, Inc.s, net income over2014, 2015, and 2016? a) IPGPs net income steadily increased, both in dollars andas a percent of revenues.b) Coherents net income steadily decreased, both in dollarsand as a percent of revenues.c) In each of the three years, IPGPs net income was greaterthan Coherents net income, both in dollars and as apercent of revenues.d) In each of the three years, IPGPs net income in dollarswas more than Coherents, but IPGPs net income as apercent of revenues was less than Coherents. 29 In 2014, 2015, and 2016, what wasIPGPs most costly item?(Hint: Look at the income statements.) a) IPGPs cost of products and services provided tocustomersb) Sales and marketing expensesc) Research and development expensesd) General and administrative expensese) Interest expensef) Income taxes 30 On average, for each dollar IPGP spenton the cost of products and services itsold in 2016, how many cents did itadd on to establish its selling price?(In other words, in 2016, on average,for every dollar in cost, how manycents did IPGP mark up its productsand services?) Round each answer to the nearest one-tenth of one cent (onedecimal place) for example, 83.8 cents. If the markup isgreater than $1.00, still write it in cents. For example, amarkup 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 inthe industry mark up their products andservices? _______ cents NOTE: If you are having trouble withthis and the next two questions, lookback at the Chapter 4 AnalysisQuestions. To see the correct answersto those questions, go to theCENGAGE gradebook and click onyour score for each question.Financial Analysis Project Page 7 31 In 2016, on average, for every dollar ofproduct and service sold, how manycents in profit did IPGP and Coherentmake after accounting for their cost ofthe products and services sold? Round each answer to the nearest one-tenth of one cent (onedecimal place).IPGP (year ended 12/31/2016): ______ centsCoherent, Inc. (year ended 10/1/2016): ______ cents 32 In 2016, on average, for every dollar ofproduct and service sold, how manyRound each answer to the nearest one-tenth of one cent (onecents in profit did IPGP and Coherent,decimal place).Inc. make after accounting for allexpenses (product costs, selling andIPGP (year ended 12/31/2016): ______ centsadministrative expenses, interest, taxes,and other)?Coherent, Inc. (year ended 10/1/2016): ______ cents 33 How did IPGPs Gross Profit Margin,Operating Profit Margin, and NetProfit Margin for 2016 compare to2015? a) IPGPs Gross Profit Margin, Operating Profit Margin, andNet Profit Margin were all better in 2016 than in 2015.b) IPGPs Gross Profit Margin, Operating Profit Margin, andNet Profit Margin were all worse in 2016 than in 2015.c) Two of IPGPs ratios were better in 2016 than in 2015;one ratio was worse in 2016.d) One of IPGPs ratios was better in 2016 than in 2015; theother two ratios were worse in 2016. 34 How did IPGPs Gross Profit Margin,Operating Profit Margin, and NetProfit Margin for 2016 compare toCoherents and the industry averages? a) IPGPs 2016 Gross Profit Margin, Operating ProfitMargin, and Net Profit Margin were all better thanCoherents and the industry averages.b) IPGPs 2016 Gross Profit Margin, Operating ProfitMargin, and Net Profit Margin were all worse thanCoherents and the industry averages.c) Two of IPGPs 2016 ratios were better than Coherentsand the industry averages; one ratio was worse.d) One of IPGPs 2016 ratios was better than Coherents andthe industry averages; the other two ratios were worse. 35 For IPGP, which of the following typesof expenses increased the most in2016, as a percent increase from 2015? a) Sales and marketing expensesb) Research and development expensesc) General and administrative expenses 36 In a high-tech industry, research anddevelopment of new products isessential. In 2016 and 2015, how didIPGPs research and development costscompare to Coherents? a) IPGP spent more on research and development thanCoherent did, both in dollars and as a percent of revenues.b) IPGP spent less on research and development thanCoherent did, both in dollars and as a percent of revenues.c) IPGP spent less dollars on research and development thanCoherent did, but as a percent of revenues, IPGP spentmore on research and development than Coherent did. Financial Analysis Project Page 8 37 In order to be profitable, it is importantfor a company to keep its selling,general, and administrative expensesunder control. In 2016 and 2015, howdid IPGPs selling, general, andadministrative expenses compare toCoherents?Notice, you will need to combine twolines for IPGP (Sales and marketing,and General and administrative).Coherents are all on one line. a) IPGP spent significantly more on selling, general, andadministrative expenses than IPGP did, both in dollarsand as a percent of revenues.b) IPGP spent significantly less on selling, general, andadministrative expenses than Coherent did, both in dollarsand as a percent of revenues.c) IPGP spent less dollars on selling, general, andadministrative expenses than Coherent did, but as apercent of revenues, IPGP spent more on selling, general,and administrative expenses than Coherent did. 38 Based on the Fixed Asset Turnoverratio, in 2016, was IPGP more or lesseffective than in 2015 at using fixedassets to generate sales? a) In 2016, IPGP was more effective than in 2015 atgenerating sales from the use of its fixed assets.b) In 2016, IPGP was less effective than in 2015 atgenerating sales from the use of its fixed assets. 39 Considering the Ratio of Net Sales toAssets, in 2016 was IPGP more or lesseffective than its competitors at usingits 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 togenerate sales.b) In 2016, IPGP was less effective than both Coherent, Inc.and the industry averages at using total assets to generatesales.Considering the Rate Earned on Totala) In 2016, IPGP was significantly more effective than bothAssets (also called Return on Assets, orCoherent, Inc. and the industry averages at using assets toROA), in 2016 was IPGP more or lessgenerate profits.effective than its competitors at usingb) In 2016, IPGP was less effective than both Coherent, Inc.its total assets to generate profits?and the industry averages at using assets to generateprofits.c) In 2016, IPGP was less effective than Coherent, Inc. atusing assets to generate profits, but significantly moreeffective than the industry averages.What type(s) of stock has IPGP issuedto stockholders? Financial Analysis Project a)b)c)d) Common stockPreferred stockCommon and preferred stockThe financial statements do not show what kind of stockhas been issued. Page 9 42 Considering the Rate Earned ona) Stockholders would be concerned about the decrease inStockholders’ Equity and Earnings Perthe Rate Earned on Stockholders Equity, because it wasShare, are IPGP’s stockholders likely tocaused by a decrease in net income in 2016. However,be happy with IPGPs ratios, comparedthey would be happy that IPGPs Earnings per Shareto the competition (Coherent and thecontinues to be higher than Coherents.industry averages)?b) Stockholders probably are happy that IPGPs Rate Earnedon Stockholders Equity and Earnings per Share continueto be higher than competitors, including Coherent, whichis IPGPs closest competitor.c) Stockholders would not care about the Rate Earned onStockholders Equity or the Earnings per Share, becauseinvestors tend to ignore both ratios. 43 Considering IPGP’s most recent Price- a) It appears investors expect IPGPs future earnings to beEarnings (P/E) Ratio, do investorsmore favorable than Coherents future earnings and theappear to expect IPGP’s future earningsindustry on average.to be more or less favorable than itsb) It appears investors expect IPGPs future earnings to becompetitors’ future earnings, onless favorable than Coherents future earnings and theaverage?industry on average.c) It appears investors expect IPGPs future earnings to beless favorable than Coherents future earnings, butslightly more favorable than the industry on average. 44 What was IPGPs largest asset at theend of 2016 and the end of 2015? a)b)c)d)e) 45 When companies have enough cashand enough retained earnings,typically, shareholders expect toreceive a return on their investment inthe form of dividends. They alsoexpect dividends to be consistent or toincrease from year to year. Whichstatement best reflects what IPGPsshareholders most likely think aboutthe dividends they received in 2016and 2015? a) IPGPs shareholders probably were happy they receiveddividends in 2016 and 2015.b) IPGPs shareholders probably understand that thecompany could not pay dividends in 2016 or 2015 due tolow cash balances in each of those years.c) IPGPs shareholders probably wonder why they did notreceive dividends in 2016 or 2015, given that thecompanys cash balances and retained earnings bothincreased in each of those years, and given that thecompany had so much cash in 2016 and 2015, it evenpurchased more short-term investments. Financial Analysis Project Cash and cash equivalentsReceivablesInventoriesPrepaid expensesProperty, plant, and equipment Page 10
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