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Question #1. (30 marks) Common-size financial statements Note: Every B/S item is divided by TA; and, every I/S item is divided by Sales. Assets Cash AR Inventory Other CA Total CA 4 20 10 6 40% PPE, gross AD PPE, net 86 (50%) 36% Investment Intangibles TA 3% 1 100% Asset turnover (ATO) = [Sales/TA] =0.90 Liabilities and Equity AP 10% ST debt 5% Other 9% Total CL 24% LT debt 36% TL 60% Equity 40% TotalTL+TE 100% Income Statement Sales CGS GP 100% 60 40% Op. Exp R&D Exp Advert Exp 20 7 3 EBIT Int Exp, net EBT 10% 1 9% Required: Use the common-size financial statements to calculate the following: Note: Every B/S item is divided by TA; and, every I/S item is divided by Sales. Example: [Int exp, net]ALT debt] =[int exp, net/Sales]*[TA/LTdebt)*ATO = (1%/36%)*0.90 =0.025 Assume 360 days in a year. 2 marks each a. Inventory turnover b. A/R turnover C. Operating cycle d. Cash cycle [Use AP turnover = CGS/AP] e. Fixed (PPE) asset turnover f. Cash ratio g. Quick ratio h. Current ratio i. Debt-to-equity ratio [ST debt +LT debt]/TE j. Times interest earned k. EBIT/Sales . 1. EBT/Sales m. EBIT/TA n. TA/TE 0. EBT/TE