Case 6 - Justin Cochran

Quiz Q8

pleased answer numbers 9 and 10. it is counted as one question

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QUESTION 7 Which of the following statements is true? O A. Profit margin is calculated by dividing total assets by sales. OB. Return on Equity rises if equity increases and net income remain constant. OCA 10% increase in cash will lead to a greater Cash Ratio O D. The current ratio increases if the current liabilities increase QUESTION 8 Which of the following statements is false? A. A positive cash conversion cycle means the company is payıng its payables before receiving its recervables. O B. A negative cash conversion cycle means the company is collecting its recervable before payıng its payables. OC The cash conversion cycle is the length of time required for the company to recieve its inventory and then recerve cash from the sales of its inventory. O D.All of the above statements are true.

4. Financial ratios in the forecasting process Your boss has asked you to take a closer look at your company's credit policies. You have been given the following information: Accounts receivable balance: Average daily sales: Weighted average cost of capital: $715,000 $13,450 10% Your firm's days sales outstanding (DSO) is Your boss is unhappy with your company's DSO and wants to bring it down to the industry average of 25 days. The marketing department told you that they expect sales to grow by 12% next year. This means that your company can expect to have an accounts receivable balance of next year.

QUESTION 8 Which of the following statements is true? O A. The DuPont Identity is used to calculate Return on Assets. B. A company can imporve their P/E ratio by improving their EPS. O C. A Market to Book ratio greater than 1 always means the stock is undervalued. D. All of the statements are false.

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How should the company respond to the ongoing situation to mitigate risk of failing the working capital given the following financial ratio? 1. Liquidity ratio :  current ratio: 2.61xquick ratio: 2.56cash ratio: 0.85 2. Accounts receivable turnover: 4.08Ave collection period: 89.46 days 3. Inventory turnover: 38.76ave age of inventory: 9.42 4. Average payable turnover: 1.04ave payment period: 350.96 Note:  Their working capital is 22,887,683 Current asset (37,127,683) - current liabilities (14,260,065) = 22,887,683

QUESTION 7 Which of the following companies will probably have the highest decline in profit if the economy goes into recession? O A company with a DOL = 5.7 A company with a DOL = 2.5 A compnay with a DOL = 5.8 A company with a DOL = 5.5

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QUESTION 14 Based on the current ratio and debt ratio of Home Depot and Lowe's, which company appears to have better liquidity (measured by the current ratio-high is good) and better solvency (measured by the debt ratio-low is good)? OA Lowe's has better liquidity and better solvency. OB. Home Depot has better liquidity and better solvency. OC. Home Depot has better solvency, but Lowe's has better liquidity. OD. Lowe's has better solvency, but Home Depot has better liquidity.

QUESTION 3 The directors of X ple are comparing some of the company's year-end statistics with those of Y ple, the company' main competitor. X plc has had a fairly normal year in terms of profit but Y ple's latest profits have been severely reduced by an exceptional loss from the closure of an unsuccessful division. Y plc has a considerably higher level of financial gearing than X plc. The board is focusing on the figures below. Share price Nominal value of shares Gross earnings yield Gross dividend yield Price/Earnings ratio Proportion of profits earned overseas X plc K450 K50 8.89% 5% 15 60% Y ple K525 K100 5.33% 4% 25.- 0% R₂+ B (RM-15₂) In the course of the discussion a number of comments are made, including those given below: Discuss comments (a) to (e), making use of the above data where appropriate. (a) 'There is something odd about the P/E ratios. Y plc has had a particularly bad year. Its P/E should surely be lower than ours'. (b) 'Y ple's earnings yield is lower than ours.…

Problem 11-15 (Algo) Review problem-understanding liquidity measures LO 11-1 Assume that the current ratio for Arch Company is 2.5, its acid-test ratio is 2.0, and its working capital is $330,000. Answer each of the following questions independently, always referring to the original information. Required: a. How much does the firm have in current liabilities? Note: Do not round intermediate calculations.

Suppose you are conducting an analysis of the financial performance of Blue Hamster Manufacturing Inc. over the past three years. The company did not issue new shares during these three years and has faced some operational difficulties. The company has thus pilot tested some new forecasting strategies for better operations management. You have collected the company’s relevant financial data, made reasonable assumptions based on the information available, and calculated the following ratios.   Ratios Calculated   Year 1 Year 2 Year 3 Price-to-cash-flow 6.40 8.32 9.32 Inventory turnover 12.80 15.36 17.20 Debt-to-equity 0.20 0.21 0.25   Based on the preceding information, your calculations, and your assumptions, which of the following statements can be included in your analysis report? Check all that apply.   A. The company’s creditworthiness has improved over these three years as evidenced by the increase in its debt-to-equity ratio over time.   B. Blue…

1. Under what circumstances would you consider a corporate net income of P1 million for the year as being unreasonably low? Under what circumstances would you consider a corporate profit of P1 million as being unreasonably high? 2. Nets sales of the Premiere General Store have been increasing at a reasonable rate, but net income has been declining steadily as a percentage of these sales. What appears to be the problem?

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A firm’s balance sheets for the last two years are as follows (refer to image): Sales in 20X1 were $250,000. Sales in 20X2 were $250,000. a. Based solely on the current ratio and the quick ratio, has the firm’s liquidity position deteriorated or improved? b. Without doing a calculation, has days sales outstanding (receivables turnover) improved? How do you know? c. Without doing a calculation, has inventory turnover deteriorated? How do you know? d. If the firm earned $5,000 during 2012, what proportion of those earningswere distributed?

4- An analyst is evaluating the solvency and liquidity of Apex Manufacturing and has collected the following data (in millions of euro): FY3 1750 5000 FY4 1900 FY5 Total debt 2000 • Total equity 4500 4000 Which of the following would be the analyst's most likely conclusion?

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