1. Billy Industrial Smoothing has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 280,000 Total CL $ 70,000 Total CA $364,000 Long-term debt 140,000 Net fixed assets 126,000 Common equity 280,000 Total assets $490,000 Total liab. and equity $490,000 Sales $280,000 Net income $21,000 Billie's new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.75, without affecting either sales or net income.

What would Billies new level of current assets be in order for the firm to reach the desired Current Ratio?

Assume current liabilities stay the same. In order to reach the target current asset level you just found in question 1, what is the amount Billy would need to cut inventory levels by? And, what would be the new level of inventory for Billy?

2. A. If Cruella firm has an equity multiplier of 4.75 what will their debt ratio be?

2. B. Cruella Inc. has a profit margin of 17%, sales of $23,300,000, debt of $7,750,000, and debt/assets ratio (debt ratio) of 33%. Assuming an after-tax interest rate of 5% on all debt, what is Cruellas ROA?

2. C. Cruella Inc. sells on terms of net 30. Cruellas sales were $375,000 last year, and their year-end receivables were $63,000. By how many days are customers paying early or late?