a)
To discuss: The impact of sale of additional common stock and uses those proceeds to increase inventory and to increase cash balances on company’s current ratio.
b)
To discuss: The impact of sale of additional common stock and uses those proceeds to increase inventory and to increase cash balances on company’s
c)
To discuss: The impact of sale of additional common stock and uses those proceeds to increase inventory and to increase cash balances on company’s quick ratio.
d)
To discuss: The impact of sale of additional common stock and uses those proceeds to increase inventory and to increase cash balances on company’s debt to total assets.
e)
To discuss: The impact of sale of additional common stock and uses those proceeds to increase inventory and to increase cash balances on company’s total asset turnover.
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Contemporary Financial Management
- Define each of the following terms: Liquidity ratios: current ratio; quick, or acid test, ratio Asset management ratios: inventory turnover ratio; days sales outstanding (DSO); fixed assets turnover ratio; total assets turnover ratio Financial leverage ratios: debt ratio; times-interest-earned (TIE) ratio; EBITDA coverage ratio Profitability ratios: profit margin on sales; basic earning power (BEP) ratio; return on total assets (ROA); return on common equity (ROE) Market value ratios: price/earnings (P/E) ratio; price/cash flow ratio; market/book (M/B) ratio; book value per share Trend analysis; comparative ratio analysis; benchmarking DuPont equation; window dressing; seasonal effects on ratiosarrow_forwardWhich of the following ratios is used to measure a firms profitability? a. Liabilities Ă· Equity c. Sales Ă· Assets b. Assets Ă· Equity d. Net Income Ă· Net Salesarrow_forwardThe cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnoverarrow_forward
- Calculate the following financial ratios for The Boeing Company. If not Applicable write N/A: Return on Shareholders’ Equity Return on Assets Return on Sales Gross profit margin ratio Receivable Turnover Receivable Ratio Period Inventory Turnover Inventory-on-hand period Asset Turnover Cash and marketable securities to total assets Quick ratio Current ratio Accounts payable turnover Days’ payable turnover Financial leverage Long-term debt to shareholders’ equity Interest coverage ratioarrow_forwardDefine each of the following terms: a. Liquid asset b. Liquidity ratios: current ratio; quick ratio c. Asset management ratios: inventory turnover ratio d. Debt management ratios: total debt to total capital; times-interest-earned (TIE) ratio e. Profitability ratios: profit margin; return on total assets (ROA); return on common equity (ROE); return on invested capital (ROIC); basic earning power (BEP) ratio f. Market value ratios: price/earnings (P/E) ratio; market/book (M/B) ratio; enterprise value/EBITDA ratioarrow_forwardermine to which formula does each of the following refers: , Significance of Financial Ratios Used to Measure Profitability h. Profitability in the use of working capital Amount of profit per peso of sales Profit per peso of current assets every time 3. i. Overvaluation or undervaluation of stock b. j. Rate at which owner's equity is being used current assets are used k. Amount of actual returns per share of Rate at which earnings per share are capitalized d. Earnings of the corporation on a per share of capital stock basis Number of times average current assets are C. common stock Efficiency in the use of total resources m. Numbers of times working capital is used Portion of sales absorbed by operating costs Profitability in the use of invested capital Profit earned every time working capital is 1. n. e. 0. used p. f. Ratio of distributed earnings to earnings per used share q. Profitability in the use of current assets Insufficiency of current assets g. Adequacy of markup on sales r.arrow_forward
- Match each ratio that follows to its use. Items may be used more than once. Clear All price-earnings (P/E) ratio working capital return on total assets ratio of liabilities to stockholders’ equity quick ratio indicate the ability to pay current liabilities assess the profitability of the assets indicate how much of the company is financed by debt and equity indicate future earnings prospects indicate instant debt-arrow_forwardDefine each of the following terms:a. Liquid assetb. Liquidity ratios: current ratio; quick (acid test) ratioc. Asset management ratios: inventory turnover ratio; days sales outstanding (DSO);fixed assets turnover ratio; total assets turnover ratiod. Debt management ratios: total debt to total capital; times-interest-earned (TIE) ratioe. Profitability ratios: operating margin; profit margin; return on total assets (ROA);return on common equity (ROE); return on invested capital (ROIC); basic earning power (BEP) ratiof. Market value ratios: price/earnings (P/E) ratio; market/book (M/B) ratio; enterprise value/EBITDA ratio g. DuPont equation; benchmarking; trend analysish. “Window dressing” techniquesarrow_forwardProblem no 19, (Ref. 3) The following are the financial statements of Bagmati Bitumin Limited. Assets Cash Accounts receivable Inventory Total current assets Fixed assets Total assets Sales Cost of goods sold Depreciation Bagmati Bitumin Limited Balance Sheet as of December 31, 2016 and 2017 2016 Rs 650 2,382 4,408 Rs 7,440 2017 Liabilities and Equity Rs 710 Accounts payable 2,106 Notes payable 4,982 Other Rs 7,798 Rs 13,992 Rs 18,584 Total debt Total current liabilities Long-term debt Owners' equity (1,250 shares outstanding) Rs 21,432 Rs 26,382 Total liabilities and equity Earnings before interest and taxes Interest paid Taxable income Taxes @ 35% Net Income Dividends Addition to retained earnings Market price for a share of stock 2016 Rs 987 640 90 Rs 1,717 4,318 Rs 6,035 Rs 15,397 Bagmati Bitumin Limited Income Statement for the Year Ended December 31, 2017 2017 Rs 1215 718 230 Rs 2,163 4,190 Rs 6,353 Rs 20,029 Rs 21,432 Rs 26,382 Rs 28,000 11,600 2,140 Rs 14,260 980 Rs 13,280…arrow_forward
- 2. Calculate the projected inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. How does Abiproffy's utilization of assets stack up against other firms in its industry? Calculate the projected current and quick ratios based on the projected balance sheet and income statement data. What can you say about the company's liquidity position and its trend? Calculate the projected debt ratio, the debt-to-equity ratio, liabilities-to-assets ratio, earnings multiplier, times-interest-earned, and EBITDA coverage ratios. How does Abiproffy compare with the industry with respect to financial leverage? What can you conclude from these ratios? Calculate the projected price/earnings ratio and market/book ratio. Do these ratios indicate that investors are expected to have a high or low opinion of the company? It is commonly recommended that the managers of a firm compare the performance of their firm to that of its peers. Increasingly, this is becoming a…arrow_forwardUsing the statements provided Calculate the following liquidity ratios: Current ratio Quick ratio Calculate the following asset management ratios: Average collection period Inventory turnover Fixed asset turnover Total asset turnover Calculate the following financial leverage ratios Debt to equity ratio Long-term debt to equity Calculate the following profitability ratios: Gross profit margin Net profit margin Return on assets Return on stockholders’ equity For example: you should present it like the text, or as:Gross margin = 1,933 divided by 8,689 = 22.2% A competitor of ACME has for the same time period reported the following three ratios: Current ratio 1.52Long-term debt to equity .25 or 25%Net profit margin .08 or 8% Given these three ratios only which company is performing better on each ratio? Also overall who would you say has the best financial performance and position. Support your answer.arrow_forwardthe ratio which includes the average credit period received by the a business firm is known as options are : current asset turn over ratio working capital turnver ratio creditors turnover ratio inventory turnover ratioarrow_forward
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