Question

Question 1:

quater 1 quater 2

cash $3,000 $1,000

marketable securtiies 3,000 500

accounts recievable 6,000 2,000   

inventory (work in progress) 4,000 10,000

total curent assets $16,000 $ 13,500

total currrent liablilities $10,000 $15,000

quater 3 quater 4

cash $1,500 $1,000

marketable securtiies 500 5,000

accounts recievable 11,500 4,000

inventory (work in progress) 6,000 2,000

total curent assets $19,500 $13,000

total currrent liablilities $ 12,000 $ 6,000

a. (Rates of return) A financial analyst calculated the following ratios from a firm’s financial statements:

Operating profit margin = 22%

b. (Accounts receivable ratios) A firm has annual sales of $5 million, of which 20% is for cash and the remainder is credit sales. What is the firm’s accounts receivable turnover and average collection period if its average balance of accounts receivable is:

a. $250,000?

b. $500,000?

c. $ 750,000?

c. (Inventory ratios) A firm reported cost of goods sold of $100,000 last year. Determine the firm’s inventory turnover and inventory days ratios if the firm maintained an average balance in inventory of:

a. $100,000

b. $ 50,000

c. $10,000

d. $ 1,000

d. (Accounts payable ratios) A firm purchased $400,000 of merchandise inventory last year. Determine the average balance in the firm’s account “accounts payable—merchandise inventory” if:

a. Accounts payable turnover is 10 times

b. It takes an average of 45 days to pay accounts payable

c. Accounts payable turnover is 20 times

d. It takes an average of 10 days to pay accounts payable

f. (Debt service ratios) A firm reported EBIT of $85,000 last year. The firm paid interest of $25,000 and repaid $15,000 of debt principal. The firm is in the 35% federal income tax bracket. Calculate the following ratios for this firm:

a. Times interest earned

b. Fixed charge coverage

Answer 1