Problem 3-15

Partridge Inc. sells about $63 million a year on credit. Good credit and collections performance in the industry result in a 32-day ACP.

What is the maximum receivables balance Partridge can tolerate and still receive a good rating with respect to credit and collections? (Hint: Write the equation defining ACP, treat the A/R balance as the unknown, substitute given or target values, and solve.) Use a 360-day year for your calculations. An answer of $1.2 million should be entered as 1200000. $

If Partridge is now collecting an average receivable in 40 days, by how much will it have to lower the receivables balance to achieve a good rating? Use a 360-day year for your calculations. An answer of $1.2 million should be entered as 1200000. $

Problem 3-18

Sweet Tooth Cookies, Inc. has the following ratios.

ROE	=	12.5%
T/A turnover	=	1
ROS	=	10%

What percentage of its assets are financed by equity? (Hint: Substitute into the extended Du Pont equation.) Round your answer to the nearest whole percentage.

%

Problem 3-20

You are given the following selected financial information for The Blatz Corporation.

Income Statement		Balance Sheet
COGS	$810	Cash	$300
Net Income	$112	Net Fixed Assets	$850

Ratios
ROS	10%
Current Ratio	2.3
Inventory Turnover (COGS)	6.0x
ACP	45 days
Debt Ratio	49.12%

Calculate accounts receivable, inventory, current assets, current liabilities, debt, equity, ROA, and ROE. Assume 360 days in a year. Round all your dollar answers to the nearest dollar. Round all your percentage answers to 1 decimal place.

Accounts Receivable	$
Inventory	$
Current Assets	$
Current Liabilities	$
Debt	$
Equity	$
ROA	%
ROE	%

789+

456-

123*

0.=/

Problem 3-22

Tribke Enterprises collected the following data from its financial reports for 20X3:

Stock Price	$18.03
Inventory Balance	$255000
Expenses (excluding COGS)	$1060000
Shares Outstanding	250000
Average Issue Price of Shares	$5.00
Gross Margin %	40%
Interest Rate	8%
TIE Ratio	8
Inventory Turnover	18x
Current Ratio	1.5
Quick ratio	.75
Fixed Asset Turnover	1.5

Complete the following abbreviated financial statements, and calculate per share ratios indicated. (Hint: Start by subtracting the formula for the quick ratio from that for the current ratio and equating that to the numerical difference.) Round your answers (except ratios) to the nearest dollar. Round the values of ratios to 2 decimal places. (Ignore taxes.)

INCOME STATEMENT
Revenue	$
COGS
GM	$
Expense
EBIT	$
Interest
EBT	$

BALANCE SHEET
Current Assets	$	Current Liabilities	$
Fixed Assets		Long Term Debt
		Paid in Capital*
		Retained Earnings
		Total Equity
Total Assets	$	Total Liabilities & Equity	$
RATIOS
Book Value per Share	$	Market/Book Ratio

*Paid in Capital=Common Stock + Paid in Excess

Problem 3-10

A group of investors is considering buying the Wheelwright Corporation, but does not want to contribute to the companys financial support after the purchase. Wheelwrights management has offered the following financial statements covering last year ($M omitted):

Wheelwright Corporation
Balance Sheets
	ASSETS
	Beginning	Ending
Cash	6	9
Accts receivable	13	20
Inventory	12	7
CURRENT ASSETS	31	36
Fixed Assets
Gross	100	115
Accumulated depreciation	(12)	(18)
Net fixed assets	88	97
TOTAL ASSETS	119	133
	LIABILITIES & EQUITY
Accts payable	17	21
Accruals	6	8
CURRENT LIABILITIES	23	29
Debt	71	59
Equity	25	45
TOTAL LIABILITIES & EQUITY	119	133

Wheelwright Corporation
Income Statement
Sales	101
COGs*	31
Depreciation	6
Gross Margin	64
Expenses	28
EBIT	36
Interest	8
EBT	28
Tax	8
Net income	20
*Cost of Goods Sold

Wheelwright paid no dividends and sold no new stock during the year. The firms tax rate is 30%.

Develop Wheelwrights free cash flow and make a recommendation as to whether it seems to be an appropriate acquisition for the investors. Round your answer to one decimal place. Enter your answer in million of dollar.

Free Cash flow $ millions The input in the box below will not be graded, but may be reviewed and considered by your instructor.

Assume that the investors will purchase the company subject to its existing debt ($59M). Does that change your recommendation?