Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can u please help me to answer question 2, 3 and 4. I really appreciate your job. And I really need the answer within 30

image text in transcribed

Can u please help me to answer question 2, 3 and 4. I really appreciate your job. And I really need the answer within 30 minutes. Thank you

TUTORIAL CHAPTER 4 (FINANCIAL RATIO ANALYSIS) 1. The liabilities and owners' equity for Campbell Industries is as follows: Accounts payable $ 500,000 Notes payable $ 250,000 Current liabilities $ 750,000 Long-term debt $ 1,200,000 Common equity $5,000,000 Total liabilities and equity $6,950,000 a) What fraction of the firm's assets does the firm finance using debt liabilities)? b) If Campbell were to purchase new warehouse for $1 million and finance it all using long-term debt, what would happen to the firm's debt ratio? 2. The Brenmar Sales Company had a gross profit margin of 30 percent and sales of $9 million in year 2019. Seventy-five percent of the firm's sales are on credit, and the remainder is cash sales. Brenmar's current assets equal $1.5 million, its current liabilities equal $300,000, and it has $100,000 in cash plus marketable securities. a) If Brenmar's accounts receivable equal $562,500, what is the average collection period? b) If Brenmar wants to have average collection period of 20 days, by how much would it have to reduce its level of accounts receivable? c) Brenmar's inventory turnover ratio is 9 times. What is the level of Brenmar's inventories? 3. Advanced Autoparts (AAP) has total current assets of $1,807,626 and current liabilities of $1,364,994. a) What is the firm's current ratio? b) If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.20? c) If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce currents assets to accomplish this goal? 4. The R.M. Smithers Corporation earned an operation profit margin of 10 percent based on sales of $10 million and total assets of $5 million in year 2019. a) What was Smithers' total asset turnover ratio? b) During the coming year (2020), the company's president has set a goal of attaining total asset turnover of 3.50. How much must firm sales increase, other things being the same, for the goal to be achieved? (State your answer in both dollars and the corresponding percent increase in sales). What was Smithers' operating return on assets in year 2019? Assuming the firm's operating profit margin remains the same, what will the operating return on assets be in year 2020 if the total asset turnover goal is achieved

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Analytical Corporate Finance

Authors: Angelo Corelli

1st Edition

3319395483, 9783319395487

More Books

Students also viewed these Accounting questions