Financial Analysis Solutions Booklet FI403

Cash and easily convertible short-term investments held by Kelly Services in 2006, representing 185.8% of the base amount.

Amounts due to Kelly Services from customers for goods or services sold on credit in 2006, equal to 104.3% of the base measure.

Loans and debts that Kelly Services must repay within one year in 2006, representing 121.7% of a reference amount.

Amounts that Kelly Services owes to its suppliers for goods or services purchased on credit in 2006, equal to 120.3% of a base value.

Represents all assets expected to convert to cash within a year for Kelly Services. In 2006, it was 108.7% of a benchmark.

Represents all liabilities that have to be paid within one year. In 2006, it represented 109.1% of a baseline measure for Kelly Services.

The amount of capital the company raised by selling common stock in the Class A category. In 2006, this was 100% of a baseline value.

Capital investment from common stock in Class B category equal to 99.6% of a baseline measure for 2006.

The difference between a company's assets and liabilities, reflecting the ownership stake of shareholders. In 2006, it was 112.9% of some benchmark.

Total financial obligations of the company and the shareholders' ownership, which totaled 111.9% of a baseline in 2006.

A financial statement analysis technique that expresses each line item as a percentage of a base figure (usually total revenue or total assets) within the same period.

A financial statement analysis technique that compares each line item over different periods as a percentage of the base figure in the earliest period.

The total income generated by Kelly Services from providing staffing and other services to clients.

The direct expenses associated with providing services, such as wages, benefits, and fees paid to temporary workers.

The difference between revenue from services and the cost of services, representing the profit earned before deducting operating expenses.

The profit earned from core business operations after deducting all operating expenses, such as selling, general, and administrative costs.

The company's profit from its ongoing business activities, excluding any gains or losses from discontinued operations.

The company's total profit after all expenses, taxes, and other income or losses are accounted for.

A financial metric measuring the proportion of a company's total assets financed by debt. It shows the company's leverage and the risk associated with its reliance on borrowed funds.

A financial metric showing the proportion of a company's funding that comes from debt compared to equity. It indicates how leveraged the company is, highlighting the potential risks associated with excessive debt.

A measure of a company's leverage, comparing total debt to tangible net worth. This metric highlights the risk associated with debt relative to the company's tangible assets.

This type of stock offers advantages such as a smaller decrease in earnings per share compared to common stock and an improvement in various debt ratios. However, it also entails a fixed dividend obligation.

The major disadvantage of preferred stock is the fixed preferred dividend that must be paid before common stockholders receive any dividends. This creates a fixed charge on the company's earnings.

Common stock offers advantages like no increase in fixed obligations, improved debt ratios, and reduced dilution in earnings compared to debt financing. It's a less risky option.

The main disadvantage of common stock is the potential for maximum dilution in earnings per share compared to other financing alternatives.

A ratio that measures a company's ability to cover its interest expense with its earnings before interest and taxes (EBIT). It indicates how many times a company’s EBIT can cover its interest expense.

This ratio measures a company's ability to cover its interest expense with its cash flows before interest and taxes. It considers cash flow, unlike the traditional Times Interest Earned.

A ratio that measures a company's ability to cover its fixed charges, including interest expense and rental payments.

FCC is calculated by dividing the adjusted income (including rentals) by the sum of interest expense and the interest portion of rental payments.

A good Times Interest Earned ratio is generally considered to be above 2.0, indicating that the company has a solid ability to cover its interest expense. However, the ideal ratio can vary depending on the industry and the company's financial risk profile.

A good FCC ratio is generally considered to be above 1.5, indicating the company has enough earnings to cover its fixed charges, including interest expense and rental payments.

Analyzing a company's financial strength through ratios like Times Interest Earned and Fixed Charge Coverage can provide valuable insights for investors, creditors, and management. It helps understand the company's risk profile, assess its ability to manage its debt, and make better decisions.

Companies often rely on debt financing to fund their operations. Assessing a company's ability to pay interest is crucial because interest expense is a fixed cost, which can significantly impact profitability. Investors and creditors are interested in ensuring that a company can meet its financial obligations.

The proportion of net income that a company retains for reinvestment rather than distributing as dividends.

The percentage of net income distributed as dividends to shareholders, indicating how much of the company's profits are returned to owners.

The annual dividend per share divided by the current market price per share, representing the return an investor receives from dividends.

The market price per share divided by the earnings per share, indicating how much investors are willing to pay for each dollar of earnings.

A high P/E ratio can indicate that investors expect strong future growth in earnings, making them willing to pay a premium for the stock.

A low P/E ratio can indicate that investors are less optimistic about future earnings growth or that the stock is undervalued.

While the dividend payout ratio focuses on the proportion of earnings distributed, the dividend yield focuses on the return received by investors from dividends.

These ratios provide investors with valuable insights into a company's profitability, dividend policies, and market valuation, aiding in making informed investment decisions.

Long-term bonds, compared to common stock, can lead to higher earnings per share due to the fixed interest payments, which are tax-deductible.

Long-term bonds can negatively impact a company's financial health by increasing debt levels, reducing earnings, and straining the ability to meet interest payments.

This ratio measures a company's profitability by showing how much net income is generated for every dollar of sales.

ROA shows how efficiently a company uses its assets to generate profit, measuring the return on its investments.

This ratio indicates how effectively a company uses its assets to generate sales, measuring the asset's sales-generating power.

This ratio reveals the profitability for common shareholders, showcasing how effectively a company uses its equity financing to generate returns.

This ratio assesses a company's ability to cover its interest expense with its earnings before interest and taxes (EBIT).