FINANCIAL MANAGEMENT (FIN301) QUESTION:

1. Spectra Inc. is a well-established soft wear company. The financial data of the current year are as follows: (3 Marks)

Cash Tk. 500,000

Inventories Tk. 250000

Accounts payable Tk. 300,000

Accounts Receivable Tk. 350,000

Notes Payable Tk. 150,000 (maturity within a year)

Total Asset Tk. 1000,000

Total Liabilities Tk. 750000

Common Stock Tk. 1000,000

Earnings before interest and tax (EBIT) Tk. 1500000

Interest payment Tk. 100,000

The company has a good relationship with one of the leading banks in the country and has a line of credit facility with them. Currently, the company wants to analyze its comparative positions with the industry with regard to its liquidity condition. The industry average of current ratio is 4.0.

a. Calculate the time interest earn ratio of Spectra Inc.?

b. Calculate the current ratio of Spectra Inc.?

c. Based on the information provided, Comment on the companys liquidity position.

2. Describe two ways to resolve agency conflict between shareholder & manager of a company