A firms balance sheets for the last two years are as follows:

Year 2019

Assets Liabilities and Equity

Cash $19,000 Accounts payable $12,000

Market securities 10,000 Accruals 10,000

Accounts receivable 21,000 Current bank note 10,000

Inventory 10,000 Long-term debt 30,000

Plant 40,000 Common stock 14,000

Retained earnings 24,000

$100,000 $100,000

Year 2020

Assets Liabilities and Equity

Cash $12,000 Accounts payable $12,000

Market securities 8,000 Accruals 10,000

Accounts receivable 18,000 Current bank note 30,000

Inventory 20,000 Long-term debt 10,000

Plant 42,000 Common stock 18,000

Retained earnings 20,000

$100,000 $100,000

Sales in 2019 were $400,000. Sales in 2020 were $400,000.

Answer the following questions in 20 words or less. Be certain to refer to the above financial statements (Asserting an answer without verification using the financial statements will earn you no credit.)

Has inventory turnover improved?

Has the firms risk exposure decreased?

Did the firm issue new stock during 2020?

If the firm bought $4,000 in new plant, what was the implied depreciation expense during 2020?

A Firm with sales of $3,650,000 has account receivable of $600,000. The industry average for days sales outstanding is 40 days. What is the potential savings in interest expense if the cost of credit is 10 percent and the firm achieves the industry average?

Why does times-interest-earned use operating income, but the return on equity uses net income instead of operating income?

In the Altman Z calculation one of the ratios was retained earnings/total assets. What is the impact on the numerical value of the ratio if

a) Accounts receivable are collected? Briefly explain.

b) The firm breaks even but maintains its dividend? Briefly explain.