Questions 1-4

Assets Liabilities and Equity Cash Accounts receivable Inventory Fixed assets Total assets $50,000 $375,000 $510,000 $925,000 $1,860,000 Accounts payable Accrued expenses Notes payable Current maturity of long-term debt Long-term debt Equity Total liabilities and equity $166,000 37,000 $75,000 $25,000 $475,000 $1,082,000 $1,860,000 Sales: $4,622,800 Cost of goods sold: $3,504,100 Operating expenses: $893,000 Purchases: $3,116,000 1. What fraction of the firm's current assets is (implicitly) being funded with long-term debt or equity? What is the significance if this figure is large versus small? 2. Assuming a 365-day year, calculate the firm's asset cash-to-cash cycle, liability cash- to-cash cycle, and days deficiency. Using this information and the procedure described in the text, estimate the firm's working capital loan needs. 3. What general concerns might you have regarding this loan request? 4. Suppose that the typical publishing firm in this industry has just one-half the amount of equity that RSM has. How will this affect key industry ratios and the working cap- ital needs estimated by this procedure, in general