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1 . Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow.
Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow. Use them in a ratio analysis that compares the firms debt and the firms profitability.ItemPelican Paper, Inc.Timberland Forest, Inc.Total assetsTotal equity all commonTotal debtAnnual interestTotal salesGross profitEarning before interest and tax EBITEarning available for common stockholdersa Calculate the following debt ratios for the two companies. Discuss their profitability relative to each other. Debt ratio Times interest earned ratiob Calculate the following profitability ratios for the two companies. Discuss their profitability relative to each other. Gross profit margin Net profit margin Return on total assets Return on common equityc In what way has the larger debt of Timberland Forest made it more profitable than Pelican Paper? What are the risks that Timberlands investors undertake when they choose to purchase its stock instead of Pelicans? The actual sales and purchases for Xenocore, Inc., for September and October along with its forecast sales and purchases for the period November through April follow. The firm makes of all sales for cash and collects on of its sales in each of the months following the sale. Other cash inflows are expected to be $ in September and April, $ in January and March, and $ in February. The firm pays cash for of its purchases. It pays for of its purchases in the following month and for of its purchases months later.YearMonthSales $Purchases $SeptemberOctoberNovemberDecemberJanuaryFebruaryMarchAprilWages and salaries amount to of the preceding months sales. Rent of $ per month must be paid. Interest payments of $ are due in January and April. A principal payment of $ is also due in April. The firm expects to pay cash dividends of $ in January and April. Taxes of $ are due in April. The firm also intends to make a $ cash purchase of fixed assets in December.a Assuming that the firm has a cash balance of $ at the beginning of November, determine the endofmonth cash balances for each month, November through April.b Assuming that the firm wishes to maintain a $ minimum cash balance, determine the required total financing or excess cash balance for each month, November through April.c If the firm was requesting a line of credit to cover needed financing for the period November to April, how large would this line have to be Explain your answer.
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