Whether inventory sold has any impact on the company’s current ratio.

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Answer 1

Question

Chapter 28, Problem 18PS

a.

Summary Introduction

To discuss: Whether inventory sold has any impact on the company’s current ratio.

b.

Summary Introduction

To discuss: Whether company acquired a bank loan to pay its providers is influence the company’s current ratio.

c.

Summary Introduction

To discuss: Whether company made arrangements in the line of credit influence the company’s current ratio.

d.

Summary Introduction

To discuss: Whether overdue bill paid by the clients influence the company’s current ratio.

e.

Summary Introduction

To discuss: Whether the use of cash to purchase extra inventories influence the current ratio of the company.

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Current Ratio: Would the following events increase or decrease a firms ratio? a. Inventory sold? b. A firm takes out a bank loan to pay its suuppliers? c. The firm arranges a line of credit that allows it to borrow at any time to pay its suppliers?

(Liquidity analysis) When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm had total current assets of $1,912,160,600 and current liabilities of $1,365,829,000. a. What is the firm's current ratio? b. If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? c. If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal?

(Liquidity analysis) When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm had total current assets of $1,908,685,800 and current liabilities of $1,363,347,000. a. What is the firm's current ratio? b. If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? c. If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal?

Answer 2

Question

Chapter 28, Problem 18PS

a.

Summary Introduction

To discuss: Whether inventory sold has any impact on the company’s current ratio.

b.

Summary Introduction

To discuss: Whether company acquired a bank loan to pay its providers is influence the company’s current ratio.

c.

Summary Introduction

To discuss: Whether company made arrangements in the line of credit influence the company’s current ratio.

d.

Summary Introduction

To discuss: Whether overdue bill paid by the clients influence the company’s current ratio.

e.

Summary Introduction

To discuss: Whether the use of cash to purchase extra inventories influence the current ratio of the company.

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Answer 3

Question

Chapter 28, Problem 18PS

a.

Summary Introduction

To discuss: Whether inventory sold has any impact on the company’s current ratio.

b.

Summary Introduction

To discuss: Whether company acquired a bank loan to pay its providers is influence the company’s current ratio.

c.

Summary Introduction

To discuss: Whether company made arrangements in the line of credit influence the company’s current ratio.

d.

Summary Introduction

To discuss: Whether overdue bill paid by the clients influence the company’s current ratio.

e.

Summary Introduction

To discuss: Whether the use of cash to purchase extra inventories influence the current ratio of the company.

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Answer 4

Question

Chapter 28, Problem 18PS

a.

Summary Introduction

To discuss: Whether inventory sold has any impact on the company’s current ratio.

b.

Summary Introduction

To discuss: Whether company acquired a bank loan to pay its providers is influence the company’s current ratio.

c.

Summary Introduction

To discuss: Whether company made arrangements in the line of credit influence the company’s current ratio.

d.

Summary Introduction

To discuss: Whether overdue bill paid by the clients influence the company’s current ratio.

e.

Summary Introduction

To discuss: Whether the use of cash to purchase extra inventories influence the current ratio of the company.

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Answer 5

Chapter 28, Problem 18PS

a.

Summary Introduction

To discuss: Whether inventory sold has any impact on the company’s current ratio.

b.

Summary Introduction

To discuss: Whether company acquired a bank loan to pay its providers is influence the company’s current ratio.

c.

Summary Introduction

To discuss: Whether company made arrangements in the line of credit influence the company’s current ratio.

d.

Summary Introduction

To discuss: Whether overdue bill paid by the clients influence the company’s current ratio.

e.

Summary Introduction

To discuss: Whether the use of cash to purchase extra inventories influence the current ratio of the company.

Answer 6

Chapter 28, Problem 18PS

a.

Summary Introduction

To discuss: Whether inventory sold has any impact on the company’s current ratio.

Answer 7

Chapter 28, Problem 18PS

a.

Summary Introduction

To discuss: Whether inventory sold has any impact on the company’s current ratio.

Answer 8

b.

Summary Introduction

To discuss: Whether company acquired a bank loan to pay its providers is influence the company’s current ratio.

Answer 9

b.

Summary Introduction

To discuss: Whether company acquired a bank loan to pay its providers is influence the company’s current ratio.

Answer 10

c.

Summary Introduction

To discuss: Whether company made arrangements in the line of credit influence the company’s current ratio.

Answer 11

c.

Summary Introduction

To discuss: Whether company made arrangements in the line of credit influence the company’s current ratio.

Answer 12

d.

Summary Introduction

To discuss: Whether overdue bill paid by the clients influence the company’s current ratio.

Answer 13

d.

Summary Introduction

To discuss: Whether overdue bill paid by the clients influence the company’s current ratio.

Answer 14

e.

Summary Introduction

To discuss: Whether the use of cash to purchase extra inventories influence the current ratio of the company.

Answer 15

e.

Summary Introduction

To discuss: Whether the use of cash to purchase extra inventories influence the current ratio of the company.

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 28 - Prob. 1PS Ch. 28 - Financial ratios Table 28.10 gives abbreviated...Ch. 28 - Performance measures Look again at Table 28.10. At...Ch. 28 - Prob. 5PS Ch. 28 - Financial ratios True or false? a. A companys...Ch. 28 - Book rates of return Keller Cosmetics maintains an...Ch. 28 - Prob. 8PS Ch. 28 - Prob. 9PS Ch. 28 - Prob. 10PS Ch. 28 - Prob. 11PS

Whether inventory sold has any impact on the company’s current ratio.

Solution Summary: The author enumerates the factors that influence the company's current ratio.

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To discuss: Whether inventory sold has any impact on the company’s current ratio.

To discuss: Whether company acquired a bank loan to pay its providers is influence the company’s current ratio.

To discuss: Whether company made arrangements in the line of credit influence the company’s current ratio.

To discuss: Whether overdue bill paid by the clients influence the company’s current ratio.

To discuss: Whether the use of cash to purchase extra inventories influence the current ratio of the company.

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Chapter 28 Solutions