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 4% Cash AR Inventory Other CA Total CA 20 10 6 40% PPE, gross AD 86 (30%) 56% PPE, net Investment Intangibles 3% 1 100% TA Asset turnover (ATO) = [Sales/TA] =0.90 Liabilities and Equity AP ST debt Other Tot CL LT debt L Equity Total TL+TE 10% 5% 9% 21% 30% 60% 40% 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][LT 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 o. EBT/TE