Questions (2 pts. each)Answers1In 2014, 2015 and 2016,.docx

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 does IPGP use for
accounting purposes? (Refer to Note 1 in the Notes to the

Financial Statements.)
a)LIFO
b) FIFO
c) Average Cost
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.
How many days, on average,in 2016, did it take IPGP to
purchase, stock, and sell its inventory?
HINT: The Inventory Turnover statistic is not the answer to
this question. Think of "turnover" 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.
Round your answer to one decimal place.
___178____ days
Explanation: The answer is same as days sales in inventory
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 hasbeen 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 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 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?
___55.6____ days

It is the same as days sales in receivables
8
(are) true regarding IPGP’s management of accounts receivable?
Hint: Remember to look on the Ratios worksheet at Coherent
and the industry averages when asked about IPGP’s
competition.
a) Comparing 2016 to 2015, the percent increase in IPGP’s Net
Sales was larger than the percent increase in itsAccounts
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.
9
In 2016, on average, how many days did it take IPGP to pay its
vendors (suppliers)?
_21.9______ days
Answer is same as days payables outstanding
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
DidIPGP pay its own Accounts Payable more quickly or less
quickly than its competitors paid their vendors? (Competitors
include Coherent, Inc. and the industry averages.)
a) IPGP paid its vendors more quickly than its competitors paid
their vendors.
b) IPGP paid its vendors less quickly than its competitors paid
their vendors.
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.
14
Considering the Cash Conversion Cyclesin2015 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 neededto run its business.
c) In 2016, as compared to 2015, IPGP improved its overall
working capital management.
d) Overall, IPGP’s competitors managedtheir 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).
____181,888,000 (Increase)__ (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.
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?
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.
19
What method of depreciation does IPGP use for book (financial
accounting) purposes? (Remember, the Notes to the Financial
Statements give you this type of information. Look for
“Significant Accounting Policies”.)
a) Straight-line
b) Double declining balance
c) MACRS
20
In terms of total assets, which company (IPGP or Coherent)
grew more in the 2016fiscal year (as compared to 2015)?
a) IPGP grew more than Coherent, Inc. did.
b) Coherent, Inc. grew more than IPGP did.

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?
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
22
Remember that many companies use the term "Long-Term Debt"
or “Long-Term 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.
What is the total amount IPGP owed to banks (current portion
plus long-term portion) at the end of 2016?
Include all the zeros in your answer.
$ 40,823,000
_________________________

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?
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.
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 its operations than its
competitor’s hadused? (Competitors include Coherent and the
industry averages.)
a)IPGP hadused a higher portion of debt than its competitors
had.
b) IPGP hadused a lower portion of debt than its competitors
had.
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
long-term loans to IPGP or to Coherent, Inc.?
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.
26

Which statement best describes the trend in IPGP’s revenues
and its closest competitor, Coherent, Inc.’s, revenues over 2014,
2015, and 2016?
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 wereless 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.
27
What was IPGP’s percent increase in revenues from 2015 to
2016?
11.6_____ %
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
wasmore 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?)
For every dollar in cost, on average, how many cents did
Coherent, Inc. mark up its products and services?
For every dollar in cost, on average, how many cents did all
companies in the industry mark up their products and services?
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.
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.
______121.7_ cents
_____80.1__ cents
______75.8_ cents
The answers are the same as the average markup percent
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?
decimal place).
IPGP (year ended 12/31/2016): _54.9_ cents
Coherent, Inc. (year ended 10/1/2016): ___44.5_ cents
Answers are the same as the gross profit margin
32
In 2016, on average, for every dollar of product and service
sold, how many cents in profit did IPGPand Coherent, Inc. make
after accounting for all expenses (product costs, selling and
administrative expenses, interest, taxes, and other)?

decimal place).
IPGP (year ended 12/31/2016): __25.9____ cents
Coherent, Inc. (year ended 10/1/2016): _14.9_____ cents
Answers are equal to the net profit margins
33
How did IPGP’sGross Profit Margin, Operating Profit Margin,
and Net Profit Margin for 2016compare 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.
That is gross profit margin
34
How did IPGP’sGross Profit Margin, Operating Profit Margin,
and Net Profit Margin for 2016compare toCoherent’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
Coherentdid, both in dollars and as a percent of revenues.
c) IPGP spent less dollars on research and development than
Coherentdid, but as a percent of revenues, IPGP spent more on
research and development than Coherent did.
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 didIPGP’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
b) IPGP spent significantly less on selling, general, and

administrative expenses than Coherent did, both in dollars and
c) IPGP spent less dollars on selling, general, and
administrative expenses than Coherentdid, 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?
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.
40
Considering the Rate Earned on Total Assets (also called Return
on Assets, or ROA), in 2016wasIPGP more or less effective
than its competitors at using its total assets to generate profits?
a) In 2016, IPGP was significantly more effective than both
Coherent, Inc. and the industry averages at using assets to
generate profits.
the industry averages at using assets to generate profits.
c) In 2016, IPGP wasless effective than Coherent, Inc. at using
assets to generate profits, but significantly more effective than

the industry averages.
41
What type(s) of stock has IPGP issued to stockholders?
a) Common stock
b) Preferred stock
c) Common and preferred stock
d) The financial statements do not show what kind of stock has
been issued.
42
Considering the Rate Earned on Stockholders' Equity and
Earnings Per Share, are IPGP's stockholders likely to be happy
with IPGP’s ratios, compared to the competition (Coherent and
the industry averages)?
a) Stockholders would be concerned about the decrease in the
Rate Earned on Stockholders’ Equity, because it was caused by
a decrease in net income in 2016. However, they would be
happy that IPGP’s Earnings per Share continues to be higher
than Coherent’s.
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-Earnings (P/E) Ratio, do
investors appear to expect IPGP's future earnings to be more or
less favorable than its competitors' future earnings, on average?
a) It appears investors expect IPGP’s future earnings to be more
favorable than Coherent’s future earnings and the industry on
average.

b) It appears investors expect IPGP’s future earnings to be less
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) Cash and cash equivalents
b) Receivables
c) Inventories
d) Prepaid expenses
e) Property, plant, and equipment
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 lowcash
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.
Page 1
Financial Analysis Project Page 11
ADMG 302 Final Project – Step 4 -- Analysis Questions (90
points)
Before answering these analysis questions, complete the first
three steps of the project (see the Canvas module).
To answer these analysis questions, you will need the
worksheets from Steps 1, 2, and 3. You will also need IPG
Photonics Corporation’s 12/31/2016 financial statements from
the Form 10-K filed 2/27/2017 and Coherent Inc.’s 10/1/2016
financial statements from the Form 10-K filed 11/29/2016. If
you have not already printed the worksheets and financial
statements--balance sheets, income statements, and statements
of cash flow--it is recommended you print them before
beginning your work on these questions. Also, you will need to
look in IPG Photonics’ Notes to the Financial Statements to
answer some questions, so have IPG Photonics’ 12/31/2016
financial statements available to view online.
The financial statements can be found in the typical place on
each company's website (Investors or Investor Relations, SEC
filings, Annual Reports). To access Coherent’s Form 10-K, you
will need to accept the terms relating to a statement about risk
factors—interesting!) As usual, the financial statements are in
Item 8 of the reports, and the Notes to the Financial Statements
are immediately following the financial statements.
To answer each question in this assignment, you first need to
decide which information to use. Some questions require you to
look closely at the ratios for IPGP, Coherent, and/or the

industry averages on the Ratios worksheet. Other questions
require you to use the percentages calculated in the Vertical and
Horizontal analysis worksheets, and other questions require you
to look in the financial statements or the Notes to the Financial
Statements. The last six questions pertain to the investment
analysis you started in Step 3.
One additional note that applies to several of the questions: On
the Ratios worksheet, industry averages are the averages of all
similar companies in the Semiconductor and Other Electronic
Components industry. Although Coherent, Inc. is IPGP’s
closest competitor, all similar companies in the industry are
competitors, so when a question asks you to compare IPGP to
competitors, look at Coherent’s ratio results and the industry
averages.
After answering the questions in this file, login to Cengage and
complete the "Final Project – Step 4 – Analysis Questions"
assignment. There are no “Check My Work” opportunities on
this assignment, and you can submit only once. Immediately
after submitting the assignment, you will be able to see only
your score. The detail about which questions you missed and
the correct answers will display after the assignment deadline.
You are encouraged to work with classmates to discuss the
questions and answers, but each student must complete his/her
own assignment in CengageNOW.
Questions (2 pts. each)
Answers
1
In 2014, 2015 and 2016, how did IPG Photonics (IPGP)
generate most of its cash flow?
a) through operations (by doing what it is in the business of
doing)

b) by selling off its buildings and equipment, which could
indicate it was in financial trouble
c) by obtaining bank loans, which could indicate either it was a
startup company, or it was in financial trouble
d) by issuing stock, which could indicate it was a startup
company
2
Calculate the dollar amount of increase or decrease in IPGP’s
working capital from the end of 2015 to the end of 2016.
Calculate the percent of increase or decrease in IPGP’s working
capital from the end of 2015 to the end of 2016.
Remember to check the financial statements to see if the
numbers are in thousands or millions (or neither). Include all
the zeros in your answer.
$ __________________ (Increase or decrease?)
______ % (Increase or decrease?)
3
At the end of the 2016 fiscal year, based on the liquidity
measures of Working Capital, Current Ratio and Quick Ratio,
how does IPGP’s ability to pay current liabilities and pay them
on time compare to the same measures for its closest
competitor, Coherent, Inc. and other companies in the same
industry?
Remember, Coherent’s ratios (and industry averages) are on the
right of the Ratios worksheet you completed in Step 2.

At the end of the 2016 fiscal year, IPGP was in a _________
(better or worse) position than its competitors to pay current
liabilities and pay them on time.
Which company will probably have an easier time obtaining a
short-term loan?
better
worse
IPGP
Coherent
4
Remember that “net” means something has been subtracted.
What has been subtracted from IPGP’s Accounts Receivable on
the balance sheet?
a) The cumulative amount of depreciation recorded in the past
b) The amount of refunds IPGP received from its vendors

because of defective products IPGP returned
c) The amount of discounts IPGP received from vendors
because of paying invoices early
d) The estimated amount of money IPGP will not be able to
collect from customers who owe IPGP for products and services
already delivered to those customers
e) The amount of inventory shrinkage
5
How many days, on average in 2016, did it take IPGP to collect
payments from customers for products and services IPGP had
sold to them?
_______ days
6
(are) true regarding IPGP’s management of accounts receivable?
Hint: Remember to look on the Ratios worksheet at Coherent
and the industry averages when asked about IPGP’s
competition.
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.

7
What method of inventory valuation does IPGP use for
accounting purposes? (Refer to Note 1 in the Notes to the
Financial Statements.)
a) FIFO
b) LIFO
c) Average Cost
8
How many days, on average, in 2016 did it take IPGP to sell its
inventory?
_______ days
9
(are) true regarding IPGP’s management of inventory?
a) The ratios indicate IPGP has been efficiently managing its
inventory, as compared to competitors (Coherent and industry
averages).
b) Comparing 2016 to 2015, the percent increase in IPGP’s Cost
of Sales was larger than the percent increase in its Inventory.
c) It took IPGP more days to sell its inventory in 2016 than it
took in 2015.
d) In 2016, IPGP took longer than competitors (Coherent and
industry averages) to sell its inventory.
g) B, C and D are true.

h) C and D are true.
10
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, plant, 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 that year’s depreciation and amortization on
existing assets. (See the top section of the Statement of Cash
Flows to find “Depreciation and Amortization” for each year.)
c) Each year, as compared to the previous year, IPGP steadily
decreased the amount of money it invested in property, plant,
and equipment.
d) Each year, IPGP invested more money in property, plant, and
equipment than Coherent, Inc. invested in property and
equipment.
e) A and C are true.
f) B and D are true.
11
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

12
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?
a) IPGP appears to have excess 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.
13
What method of depreciation does IPGP use for book (financial
accounting) purposes? (Remember, the Notes to the Financial
Statements give you this type of information. Look for
“Significant Accounting Policies”.)
a) Straight-line
b) Double declining balance
c) MACRS
14
In terms of total assets, which company (IPGP or Coherent)
grew more in the 2016 fiscal year (as compared to 2015)?
a) IPGP grew more than Coherent, Inc. did.
b) Coherent, Inc. grew more than IPGP did.
15
Did IPGP purchase any companies (businesses) in 2016?
Remember, you can get clues in the Statement of Cash Flows.
(Which section would you check?), and the Goodwill account on
the balance sheet.

Yes
No
16
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?
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 depreciation on equipment that was purchased
in the past but had not been fully depreciated as of the balance
sheet date
c) Items such as employee wages that were earned but that IPGP
had not paid for 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
17
Remember that many companies use the term "Long-Term Debt"
or “Long-Term 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.
What is the total amount IPGP owed to banks (current portion
plus long-term portion) at the end of 2016?
Include all the zeros in your answer.

$ _________________________
18
Considering the Debt Ratio and the Ratio of Liabilities to
Stockholders’ Equity for 2016, has IPGP used more or less debt
to finance its operations than its competitors have used?
(Competitors include Coherent and the industry averages.)
a) IPGP has used a higher portion of debt than its competitors
have.
b) IPGP has used a lower portion of debt than its competitors
have.
19
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?
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.
20
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
long-term loans to IPGP or to Coherent, Inc.?
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.
21
Comparing IPGP’s Times Interest Earned ratio to Coherent’s
and the industry averages, what can you say about IPGP’s
creditors’ level of comfort with IPGP’s ability to make interest
payments in the future?
a) IPGP’s creditors would assume IPGP would have absolutely
no problem making its interest payments when they come due,
even if IPGP experiences a slight decrease in earnings.
b) IPGP’s creditors would be nervous about IPGP’s ability to
make its interest payments when they come due, especially if
IPGP’s earnings decrease even slightly.
22
Which statement best describes the trend in IPGP’s revenues
and the trend in its closest competitor, Coherent, Inc.’s,
revenues over 2014, 2015, and 2016?
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.
23
What was IPGP’s percent increase in revenues from 2015 to
2016?

_____ %
24
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
b) Coherent’s net income steadily decreased, both in dollars and
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.
25
In 2014, 2015, and 2016, what was IPGP’s most costly income
statement item?
a) IPGP’s cost of the products and services it sold to customers
b) Sales and marketing expenses
c) Research and development expenses
d) General and administrative expenses
e) Interest expense
f) Income taxes

26
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 each dollar in cost, how many cents did IPGP mark up its
products and services?)
For each dollar in cost, on average, how many cents did
Coherent, Inc. mark up its products and services?
For each dollar in cost, on average, how many cents did all
companies in the industry mark up their products and services?
NOTE: If you are having trouble with this question, 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.
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
_______ cents
_______ cents

27
In 2016, on average, for each 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?
decimal place).
IPGP (year ended 12/31/2016): ______ cents
Coherent, Inc. (year ended 10/1/2016): ______ cents
28
How did IPGP’s 2016 Gross Profit Percent and Operating Profit
Margin (also called Return on Sales) compare to 2015?
a) IPGP’s Gross Profit Percent and Operating Profit Margin
were both better in 2016 than in 2015.
b) IPGP’s Gross Profit Percent and Operating Profit Margin
were both worse in 2016 than in 2015.
c) IPGP’s Gross Profit Percent was better in 2016 than in 2015,
but its Operating Profit Margin was worse in 2016 than in 2015.
d) IPGP’s Gross Profit Percent was worse in 2016 than in 2015,
but its Operating Profit Margin was better in 2016 than in 2015.
29
How did IPGP’s 2016 and 2015 Gross Profit Percent and
Operating Profit Margin compare to Coherent’s and the
industry averages?
a) IPGP’s Gross Profit Percents and Operating Profit Margins
were better than Coherent’s and the industry averages.
b) IPGP’s Gross Profit Percents and Operating Profit Margins
were worse than Coherent’s and the industry averages.

c) IPGP’s Gross Profit Percents were better than Coherent’s and
the industry averages, but IPGP’s Operating Profit Margins
were worse than Coherent’s and the industry averages.
d) IPGP’s Gross Profit Percents were worse than Coherent’s and
the industry averages, but IPGP’s Operating Profit Margins
were better than Coherent’s and the industry averages.
30
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
31
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
b) IPGP spent less on research and development than Coherent
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.
32
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
b) IPGP spent significantly less on selling, general, and
administrative expenses than Coherent did, both in dollars and
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.
33
Considering the Asset Turnover ratio, in 2016 was IPGP more
or less effective than its competitors at using its long-term
operating assets to generate sales?
and the industry averages at using long-term operating assets to
generate sales.
the industry averages at using long-term operating assets to
generate sales.
34
Considering the Return on Total Assets, in 2016 was IPGP more
or less effective than its competitors at using its total assets to
generate profits?
and the industry averages at using total assets to generate
profits.
the industry averages at using total assets to generate profits.
c) In 2016, IPGP was less effective than Coherent, Inc. at using
total assets to generate profits, but more effective than the
industry averages.
35

What type(s) of stock has IPGP issued to stockholders?
a) Common stock
b) Preferred stock
c) Common and preferred stock
d) The financial statements do not show what kind of stock has
been issued.
36
Considering the Return on Stockholders' Equity and Earnings
Per Share, are IPGP's stockholders likely to be happy with
IPGP’s ratios, compared to the competition (Coherent and the
industry averages)?
a) Stockholders would be concerned about the decrease in the
Return on Stockholders’ Equity, because it was caused by a
decrease in net income in 2016. However, they would be happy
that IPGP’s Earnings per Share continues to be higher than
Coherent’s.
b) Stockholders probably are happy that IPGP’s Return on
Stockholders’ Equity and Earnings per Share continue to be
higher than competitors’, including Coherent.
c) Stockholders would not care about the Return on
Stockholders’ Equity or the Earnings per Share, because
investors tend to ignore both ratios.
37
Considering IPGP's most recent Price-Earnings (P/E) Ratio, do
investors appear to expect IPGP's future earnings to be more or
less favorable than its competitors' future earnings, on average?
a) It appears investors expect IPGP’s future earnings to be more
average, which is not surprising, given the most recent
profitability ratios.
b) It appears investors expect IPGP’s future earnings to be less
average, which is a bit surprising, given the most recent

profitability ratios.
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.
38
What was IPGP’s largest asset at the end of 2016 and the end of
2015?
a) Cash and cash equivalents
b) Receivables
c) Inventories
d) Prepaid expenses
e) Property, plant, and equipment
39
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.

40
For this question and all remaining questions in this assignment,
refer to the information you prepared for Step 3, related to the
new inventory management system.
Assuming you had used the correct number for the company’s
required rate of return (15%), and assuming there are no other
investment proposals competing for the same money, would
IPGP consider the new inventory management system to be a
good capital investment opportunity?
Yes
No
41
In Year 1 of the project, how would the proposed inventory
management system impact IPGP’s Current Ratio?
Would this make the Current Ratio better or worse?
Increase the ratio
Decrease the ratio
Better
Worse
42
In each of Years 2-4 of the project, how would the proposed

inventory management system impact IPGP’s Current Ratio?
Would this make the Current Ratio better or worse?
Increase the ratio
Decrease the ratio
Better
Worse
43
In each of Years 1-4 of the project, how would the proposed
inventory management system impact IPGP’s Inventory
Turnover?
Would this make the Inventory Turnover better or worse?
Increase the turnover
Decrease the turnover
Better
Worse
44
Notice all five of the solvency measures in Step 2 would be
affected each year of this project. Would the proposed project
make the solvency measures better or worse?
Better
Worse
45
Almost all of the profitability measures we used in Step 2 would
be affected each year of this project.

Would the proposed project make the Gross Profit Percent
better or worse (even just a little)?
Better
Worse
Page 1
Final Project Step 4 – Analysis Questions Page 1

Questions (2 pts. each)Answers1In 2014, 2015 and 2016,.docx

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