Current Asset Usage Policy Payne Products had $1.6 million in sales revenues in the most recent year and expects sales growth the 25% this yrat me would strmine the complices on financial performance Payne has $million of foedsets and intends to keep its debt ratio at its historical level of 304. Paynes det er stort current asset polices: tt) a restricted policy in which current assets are of projected sales, (2) a moderate policy we sont des del carrer any current assets at 50% of sales Earrings before interest and taxes are expected to be 10% of sales, Payne's tarte 2 What is the expected return on equity under tath cutrent de lever? Do niet round intermediate calculations. Round your sweet to the decimur places Restricted policy Moderate policy Relaxed po cy: to this problem, we have ussumed that the level of expected sales independent of current stet policy is the I. Yes, this action would probably be valid in arest world station. A firm's current awet pots have no interest 11. No, this istion would probably be van wal world to Afirm's current asset policies may have a significant effects TIL Yes, this is a vad sometion. The current asset to followed by the firm manenot the level of long-term det udbyterm IV. Yes, this is the current policies followed by the firm many chmeleve et VA Yes, it Valle e controlled only by the degree at marketing ettermuseet Bet How would theme formar under each Therese polyleads to expected compared to moderate relaxed police say to handle conosc Vereinstelle converted turn tv between the trees Current Asset Usage Policy Payne Products had $1.6 million in sales revenues in the most recent year and expects financial performance. Payne has $1 million of fixed assets and intends to keep its debt current asset policies: (1) a restricted policy in which current assets are 45% of projecte assets of 60% of sales. Earnings before interest and taxes are expected to be 10% of sa a. What is the expected return on equity under each current asset level? Do not round in % Restricted policy: Moderate policy: Relaxed policy: % % b. In this problem, we have assumed that the level of expected sales is independent of cu 1. Yes, this assumption would probably be valid in a real world situation. A firm's curre II. No, this assumption would probably not be valid in a real world situation. A firm's c III. Yes, this is a valid assumption. The current asset policies followed by the firm main IV. Yes, this is a valid assumption. The current asset policies followed by the firm main V. Yes, this is a valid assumption. Sales are controlled only by the degree of marketing -Select- c. How would the overall risk of the firm vary under each policy? The restricted policy leads to a -Select- expected return as compared to moderate & firm's ability to handle contingencies -Select- impaired. -Select- v risk of inadec charges. Conversely, a relaxed policy means -Select- v liquid assets and -Select- to -Select policy falls between the two extremes, sales growth to be 25% this year. Payne would like to determine the effect of various current assets policies on its t ratio at its historical level of 30%. Payne's debt interest rate is currently 9%. You are to evaluate three different Eted sales, (2) a moderate policy with 50% of sales tied up in current assets, and (3) a relaxed policy requiring current sales. Payne's tax rate is 25%. intermediate calculations. Round your answers to two decimal places. of current asset policy. Is this a valid assumption? urrent asset policies have no significant effect on sales. n's current asset policies may have a significant effect on sales. mainly influence the level or long-term debt used by the firm. mainly infuence the level of fixed assets. ating effort the firm uses, irrespective of the current asset policies it employs ate & relaxed policies. -Select-M current assets in a restricted policy would imply Select- quid assets; thus, the nadequate liquidity would increase the firm's risk of insolvency and thus Select vits chance of failing to meet fixed total assets turnover ratio. In the relaxed policy. Select liquidity would decrease the firm's risk. The Current Asset Usage Policy Payne Products had $1.6 million in sales revenues in the most recent year and expects s financial performance. Payne has $1 million of fixed assets and intends to keep its debt current asset policies: (1) a restricted policy in which current assets are 45% of projecte assets of 60% of sales. Earnings before interest and taxes are expected to be 10% of sal a. What is the expected return on equity under each current asset level? Do not round in % Restricted policy: olicy: -Select- % licy: 1 % b. R III lem, we have assumed that the level of expected sales is independent of cu assumption would probably be valid in a real world situation. A firm's curren assumption would probably not be valid in a real world situation. A firm's CL is is a valid assumption. The current asset policies followed by the firm main s is a valid assumption. The current asset policies followed by the firm mainl is a valid assumption. Sales are controlled only by the degree of marketing IV V a -Select- c. How would the overall risk of the firm vary under each policy? The restricted policy leads to a -Select- expected return as compared to moderate & firm's ability to handle contingencies -Select- impaired. -Select-v risk of inadeq charges. Conversely, a relaxed policy means -Select-liquid assets and -Select- to -Select- policy falls between the two extremes. rent Asset Usage Policy ne Products had $1.6 million in sales revenues in the most recent year and expects s Encial performance. Payne has $1 million of fixed assets and intends to keep its debt rent asset policies: (1) a restricted policy in which current assets are 45% of projecte ets of 60% of sales. Earnings before interest and taxes are expected to be 10% of sal What is the expected return on equity under each current asset level? Do not round in Restricted policy: % Moderate policy: % Relaxed policy % In this problem, we have assumed that the level of expected sales is independent of cur I. Yes, this assumption would probably be valid in a real world situation. A firm's current II. No, this assumption would probably not be valid in a real world situation. A firm's cu III. Yes, this is a valid assumption. The current asset policies followed by the firm main! IV. Yes, this is a valid assumpti Trent asset policies followed by the firm mainly V. Yes, this is a valid assumptid controlled only by the degree of marketing e -Select- higher -Select- How would the overall risk of th lawen under each policy? The restricted policy leads to a Select expected return as compared to moderate & firm's ability to handle contingencies -Select- impaired. -Select- v risk of inadequ charges. Conversely, a relaxed policy means -Select- liquid assets and Select- tota -Select- policy falls between the two extremes. V t policy. Is this a valid assumption? plicies have no significant effect on sales. et policies may have a significant effect on sales. ce the level of long-term debt used by the firm. te the lei assets. firm use ve of the current asset policies it employs. Higher -Select Lower policies. -Select-Y current assets in a restricted policy would imply -Select- v liquida lidity would increase the firm's risk of insolvency and thus -Select- v its chance of fail is turnover ratio. In the relaxed policy, -Select- v liquidity would decrease the firm's ris d like to determine the effect of various current assets policies on its bt interest rate is currently 9%. You are to evaluate three different ales tied up in current assets, and (3) a relaxed policy requiring current ts to two decimal places. on? on sales. t effect on sales sed by the firm, -Select- rrent asset policies it employs. higher lower ets in a restricted policy would imply -Select- liquid assets; thus, the sk of insolvency and thus -Select- its chance of failing to meet fixed bolicy -Select- v liquidity would decrease the firm's risk. The urrent Asset Usage Policy ayne Products had $1.6 million in sales revenues in the most recent year nancial performance. Payne has $1 million of fixed assets and intends to k urrent asset policies: (1) a restricted policy in which current assets are 45 ssets of 60% of sales. Earnings before interest and taxes are expected to a. What is the expected return on equity under each current asset level? D Restricted policy: % % Moderate policy: Relaxed policy: % b. In this problem, we have assumed that the level of expected sales is inde I. Yes, this assumption would probably be valid in a real world situation. A II. No, this assumption would probably not be valid in a real world situatic III. Yes, this is a valid assumption. The current asset policies followed by IV. Yes, this is a valid assumption. The current asset policies followed by t V. Yes, this is a valid assumption. Sa ed only by the degree -Select- -Select- NO C. How would the overall risk of the firm ch policy? wont be The restricted policy leads to a -Sele return as compared to firm's ability to handle contingencies -Select- impaired. -Select- charges. Conversely, a relaxed policy means -Select- v liquid assets and -Select- policy falls between the two extremes. Asset Usage Policy roducts had $1.6 million in sales revenues in the most recent year and expects sales growth to performance. Payne has $1 million of fixed assets and intends to keep its debt ratio at its hist asset policies: (1) a restricted policy in which current assets are 45% of projected sales, (2) a of 60% of sales. Earnings before interest and taxes are expected to be 10% of sales. Payne's ta t is the expected return on equity under each current asset level? Do not round intermediate ca tricted policy: % derate policy: % axed policy: % his problem, we have assumed that the level of expected sales is independent of current asset po es, this assumption would probably be valid in a real world situation. A firm's current asset policie No, this assumption would probably not be valid in a real world situation. A firm's current asset p . Yes, this is a valid assumption. The current asset policies followed by the firm mainly influence t Yes, this is a valid assumption. The current asset policies followed by the firm mainly influence th Yes, this is a valid assumption. Sales are controlled only by of marketing effort the fim elect- Hughes w would the overall risk of the firm vary under each policy? Lower restricted policy leads to a Select- expected return as o moderate & relaxed polici nis ability to handle contingencies Select- impaired. Select risk of inadequate liquidity brges. Conversely, a relaxed policy means -Select- v liquid assets and -Select- total assets tur Belect- policy falls between the two extremes. -Select- would like to determine the effect of various current assets policies on its 's debt interest rate is currently 9%. You are to evaluate three different of sales tied up in current assets, and (3) a relaxed policy requiring current nswers to two decimal places. mption? ffect on sales. ificant effect on sales. ebt used by the firm. the current asset policies it empl -Select- decrease increase nt assets in a restricted policy w Select- liquid assets; thus, the rm's risk of Insolvency and thus -Select- its chance of failing to meet fixed laxed policy -Select- y liquidity would decrease the firm's risk. The ance. Payne has $1 million of fixed assets and intends to cies: (1) a restricted policy in which current assets are 4 sales. Earnings before interest and taxes are expected to xpected return on equity under each current asset level? Slicy: % licy: % cy: % lem, we have assumed that the level of expected sales is inde assumption would probably be valid in a real world situation. A assumption would probably not be valid in a real world situatie his is a valid assumption. The current asset policies followed by is is a valid assumption. The current asset policies followed by t s is a valid assumption. Sales are controlled only by the degree -Select- d the overall risk of the firm vary u higher icted policy leads to a -Select-ve lower ility to handle contingencies Select Conversely, a relaxed policy means -Select- policy falls between the two extremes. olicy? urn as compared to aired. -Select- liquid assets and at the level of expected sales is independent of current ass y be valid in a real world situation. A firm's current asset p bly not be valid in a real world situation. A firm's current ass The current asset policies followed by the firm mainly influen The current asset policies followed by the firm mainly influenc ales are controlled only by the degree of marketing effort the -Select- mm vary under each policy? higher elect- expected return as compared t & relaxed pc lower es -Select- Mimpaired. -Select- lequate liquid icy means -Select-liquid assets and Select- total assets the two extremes ear. Payne would like to determine the effect of various 0%. Payne's debt interest rate is currently 9%. You are y with 50% of sales tied up in current assets, and (3) a und your answers to two decimal places. a valid assumption? significant effect on sales. have a significant effect on sales. long-term debt used by the firm. fixed assets. espective of the current asset policies it employs. -Select- higher lect- current assets in a low ncrease the firm's risk of atio. In the relaxed policy. -Select- bolicy would imply Select nd thus -Select- its ch liquidity would decrease th Current Asset Usage Policy Payne Products had $1.6 million in sales revenues in the most financial performance. Payne has $1 million of fixed assets and current asset policies: (1) a restricted policy in which current as assets of 60% of sales. Earnings before interest and taxes are e a. What is the expected return on equity under each current ass Restricted policy: % Moderate policy: % Relaxed policy: % b. In this problem, we have assumed that the level of expected se I. Yes, this assumption would probably be valid in a real world II. No, this assumption would probably not be valid in a real wo III. Yes, this is a valid assumption. The current asset policies fc IV. Yes, this is a valid assumption. The current asset policies foi V. Yes this is a valid assumption. Sales are controlled only by th -Select- c. restricted e overall risk of the firm vary under each policy? moderate axed 1 policy leads to a -Select- expected return as ce to handle contingencies -Select- impaired versely, a relaxed policy means -Select- v liquid as policy falls between the two extremes. Select