Principles of Corporate Finance
Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 28, Problem 18PS
Summary Introduction

To compute: The amount of cash and marketable securities.

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The current ratio is O a solvency measure that indicates the margin of safety for bondholders O calculated by dividing current liabilities by current assets calculated by subtracting current liabilities from current assets O used to evaluate a company's liquidity and short-term debt-paying ability Question 19 On the statement of cash flows, a $9,000 gain on the sale of fixed assets would be O added to net income in converting the net income reported on the income statement to cash flows from operating activities O deducted from net income in converting the net income reported on the income statement to cash flows from operating activities O deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends O added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
9. AllStarBank has the following balance sheet (in millions): Assets $ 30 90 50 Total assets $170 Cash Loans Securities Liabilities and Equity $110 40 Equity 20 Total liabilities and equity $170 Deposits Borrowed funds AllStarBank's largest customer decides to exercise a $15 million loan co ment. How will the new balance sheet appear if AllStar uses the fol liquidity risk strategies? a. Stored liquidity management. b. Purchased liquidity management. mi
Review problem—understanding liquidity measures Assume that the currentratio for Arch Company is 2.0, its acid-test ratio is 1.5, and its working capital is$300,000. Answer each of the following questions independently, always referring tothe original information.a. How much does the firm have in current liabilities?b. If the only current assets shown on the balance sheet for Arch Company areCash, Accounts Receivable, and Merchandise Inventory, how much does thefirm have in Merchandise Inventory?c. If the firm collects an account receivable of $100,000, what will its new currentratio and working capital be?d. If the firm pays an account payable of $100,000, what will its new current ratioand working capital be?e. If the firm sells inventory that was purchased for $50,000 at a cash price of$60,000, what will its new acid-test ratio be?
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