30 000 20 000 150 000 1. The Excellence Company has the following balance sheet: (Figures: TL) Cash 10 000 Accounts payable Receivables 50 000 Other current liabilities Inventories 140 000 Long term debt Net fixed asstes 90 000 Common equity Total assets 290 000 Total liab.& equity Sales: 300 000 TL EBIT: 25 000 TL Hehe Hours 90000 - Amor 290 000 They pay currently 10% on long term debt, and if debt ratio (total debttotal assets) can be lowered, this would improve profitability and ROE (net income/equity). Financial manager thinics that current ratio (current assets/current liabilities) is too high and must be lowered. Industry average for current ratio is 2.5 x and reducing only inventories to the level that would produce the same level of current ratio as the industry, is proposed. With the funds generated through reducing inventories will be used to pay off a part of the debt to save interest expense. If the sex rate is 40% and long term debt can be paid back partially, answer the following questions a. What would be the optimal current asset level and inventory level for the company? b. Prepare a partial income statement and calculate ROE; before and after the change. e. Calculate the previous and new debt ratio and comment on the advantages and disavantages of reducing debt ratio. rity next year and planning to purchase a laptop and save money for this which will be deposited in a bank account paying Instop will cost 1800 TL next