EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 3, Problem 8P
a)
Summary Introduction
To determine: Current ratio and quick ratios of Company J.
b)
Summary Introduction
To determine: Current ratio and quick ratio when company J takes $0.25 million in cash and pays $0.25 million of current liabilities.
c)
Summary Introduction
To determine: Current ratio and quick ratio when company J sells $0.5 million of its accounts receivables to bank and uses proceeds from short term debts.
d)
Summary Introduction
To determine: Current ratio and quick ratio when company J sells $1.0 million in new stock and places the proceeds in marketable securities.
e)
Summary Introduction
To discuss: The way these examples illustrate about quick ratio and current ratio.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Rhea Company has P9,000 in cash, P11,000 in marketable securities, P26,000 in current receivables, P34,000 in inventories, and P40,000 in current liabilities. The Rhea's quick ratio is closest to *
Choices:
1.35.
1.15.
1.73.
2.00.
I am new to finance and excel. How do I solve these?
The Salem Corporation has current assets of $3.0 million. Of this total, $1.0 million is inventory, $0.5 million is cash, $1.0 million is accounts receivable, and the balance is marketable securities. Salem has $1.5 million in current liabilities.
What are the current and the quick ratios for Salem?
If Salem takes $0.25 million in cash and pays off $0.25 million of current liabilities, what happens to its current and quick ratios? What happens to its real liquidity?
If Salem sells $0.5 million of its accounts receivable to a bank and uses the proceeds to pay off short-term debt obligations, what happens to its current and quick ratios?
If Salem sells $1.0 million in new stock and places the proceeds in marketable securities, what happens to its current and quick ratios?
What do these examples illustrate about the current and quick ratios?
Erastic Corporation has $17,000 in cash, $9,500 in marketable securities, $38,500 in account receivable, $46,000 in inventories, and $45,000 in current liabilities. The corporation’s current assets consist of cash, marketable securities, accounts receivable, and inventory. The corporation’s acid-test ratio is closest to:
Multiple Choice
2.47
1.23
0.86
1.44
Chapter 3 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 3 - Prob. 1QTDCh. 3 - Prob. 2QTDCh. 3 - Prob. 3QTDCh. 3 - Prob. 4QTDCh. 3 - Prob. 5QTDCh. 3 - Prob. 6QTDCh. 3 - Prob. 7QTDCh. 3 - Prob. 8QTDCh. 3 - Prob. 9QTDCh. 3 - Prob. 10QTD
Ch. 3 - Prob. 11QTDCh. 3 - Prob. 12QTDCh. 3 - Prob. 13QTDCh. 3 - Prob. 14QTDCh. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Prob. 7PCh. 3 - Prob. 8PCh. 3 - Prob. 9PCh. 3 - Prob. 10PCh. 3 - Prob. 11PCh. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Prob. 16PCh. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Prob. 21P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Vigo Vacations has $200 million in total assets, $5 million in notes payable, and $25 million in long-term debt. What is the debt ratio?arrow_forwardChasse Building Supply Inc. reported net cash provided by operating activities of $243,000, capital expenditures of $112,900, cash dividends of $35,800, and average maturities of long-term debt over the next 5 years of $122,300. What is Chasses free cash flow and cash flow adequacy ratio? a. $94,300 and 0.77, respectively c. $130,100 and 1.06, respectively b. $94,300 and 0.82, respectively d. $165,900 and 1.36, respectivelyarrow_forwardWhirlpool manufactures and sells home appliances under various brand names. IBM develops and manufactures computer hardware and offers related technology services. Target operates a chain of general merchandise discount retail stores. The data in the following table apply to these companies (dollar amounts in millions). For each firm, assume that the market value of the debt equals its book value. REQUIRED a. Assume that the intermediate-term yields on U.S. government Treasury securities are 3.5%. Assume that the market risk premium is 5.0%. Compute the cost of equity capital for each of the three companies. b. Compute the weighted-average cost of capital for each of the three companies. c. Compute the unlevered market (asset) beta for each of the three companies. d. Assume that each company is a candidate for a potential leveraged buyout. The buyers intend to implement a capital structure that has 75% debt (with a pretax borrowing cost of 8.0%) and 25% common equity. Project the weighted-average cost of capital for each company based on the new capital structure. To what extent do these revised weighted-average costs of capital differ from those computed in Requirement b?arrow_forward
- You are evaluating the balance sheet for Goodman bees corporation from the balance sheet you find the following balances cash and marketable securities equal $400,000, account receivable equals $1,200,000, Inventory equals $2,100,000 acured wages and taxes $500,000 accounts payable $800,000 notes payable $600,000 calculate goodman bees networking capital. answer in dollars not millions round your answer to the nearest dollar amount networking capitalarrow_forwardMandesa, Inc has current liabilities of $8 million, current ratio of 2 times inventory turnover of 12 times, average collection period of 30 days, and credit sales of $64million. Calculate the value of cash and marketable securities.arrow_forwardA. B. Smith Company has guaranteed a $1 million bank note for Alender Company. How would this influence the liquidity ratios of A. B. Smith Company? How should this situation be considered?arrow_forward
- The Stewart Company has $1,566,500 in current assets and $595,270 in current liabilities. Its initial inventory level is $328,965, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes payable) increase without pushing its current ratio below 2.0? Round your answer to the nearest dollar. $arrow_forwardABC Inc. has $2 million in current assets, its current ratio is 1.6, and its quick ratio is 1.2. The company plans to raise funds as additional notes payable and to use these funds to increase inventory. By how much can ABC's short-term debt (notes payable) increase without pushing its quick ratio below 0.8?arrow_forwardYou are evaluating the balance sheet for SophieLex’s Corporation. From the balance sheet you find the following balances: cash and marketable securities = $280,000; accounts receivable = $1,380,000; inventory = $2,280,000; accrued wages and taxes = $590,000; accounts payable = $890,000; and notes payable = $780,000. Calculate SophieLex’s current ratio. (Round your answer to 2 decimal places.) Calculate SophieLex’s quick ratio. (Round your answer to 2 decimal places.) Calculate SophieLex’s cash ratio. (Round your answer to 2 decimal places.)arrow_forward
- Fresh Products Co. has P5 million in current assets, P3 million in current liabilities, and its initial inventory level is P1 million. The company plans to increase its inventory, and it will raise additional short-term debt (that will show up as notes payable on the balance sheet) to purchase the inventory. Assume that the value of the remaining current assets will not change. The company’s bond covenants require it to maintain a current ratio that is greater than or equal to 1.5. What is the maximum amount that the company can increase its inventory before it is restricted by these covenants?arrow_forwardUsing Ratios to Determine Account Balance.We are givem the following information for Cathy Corporation Sales(credit) . 3,000,000 Cash 150,000 Inventory 850,000 Current liabilities 700,000 Asset turnover 1.25 times Current ratio 2.50 times Debt-to assets ratio 40% Receivable turnover 6 times Current assets are composed of cash, marketable securities, accounts receivable and inventory. a.Calculate the amount receivable b.Calculate the marketable securities c.Calculate the fixed assets d.Calculate the long term debtarrow_forwardUsing the DuPont method, evaluate the effects of the following relationships for the Butters Corporation. A.Butters Corporation has a profit margin of 5.5 percent and its return on assets (investment) is 8.75 percent. What is its assets turnover? Round your answer to 2 decimal places. ______ times B.If the Butters Corporation has a debt-to-total-assets ratio of 65.00 percent, what would the firm’s return on equity be? Note: Input your answer as a percent rounded to 2 decimal places. C.What would happen to return on equity if the debt-to-total-assets ratio decreased to 60.00 percent? Input your answer as a percent rounded to 2 decimal places.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License