Question
Stuck on these finance problems, can't seem to get answers correct. Can anyone help to show the work/walkthroughs? Ingraham Inc. currently has $795,000 in accounts
Stuck on these finance problems, can't seem to get answers correct. Can anyone help to show the work/walkthroughs?
Ingraham Inc. currently has $795,000 in accounts receivable, and its days sales outstanding (DSO) is 57 days. It wants to reduce its DSO to 30 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 25%. What will be the level of accounts receivable following the change? Assume a 365-day year
he W.C. Pruett Corp. has $400,000 of interest-bearing debt outstanding, and it pays an annual interest rate of 11%. In addition, it has $700,000 of common stock on its balance sheet. It finances with only debt and common equity, so it has no preferred stock. Its annual sales are $1.72 million, its average tax rate is 30%, and its profit margin is 3%. What are its TIE ratio and its return on invested capital (ROIC)?
Data for Barry Computer Co. and its industry averages follow.
Barry Computer Company: | ||||
Balance Sheet as of December 31, 2016 (In Thousands) | ||||
Cash | $276,375 | Accounts payable | $294,800 | |
Receivables | 460,625 | Other current liabilities | 202,675 | |
Inventories | 368,500 | Notes payable to bank | 221,100 | |
Total current assets | $1,105,500 | Total current liabilities | $718,575 | |
Long-term debt | $552,750 | |||
Net fixed assets | 737,000 | Common equity | 571,175 | |
Total assets | $1,842,500 | Total liabilities and equity | $1,842,500 |
Barry Computer Company: Income Statement for Year Ended December 31, 2016 (In Thousands) | |||
Sales | $2,750,000 | ||
Cost of goods sold | |||
Materials | $1,265,000 | ||
Labor | 632,500 | ||
Heat, light, and power | 165,000 | ||
Indirect labor | 137,500 | ||
Depreciation | 110,000 | 2,310,000 |
Gross profit | $ 440,000 | |
Selling expenses | 275,000 | |
General and administrative expenses | 82,500 | |
Earnings before interest and taxes (EBIT) | $ 82,500 | |
Interest expense | 49,748 | |
Earnings before taxes (EBT) | $ 32,752 | |
Federal and state income taxes (40%) | 13,101 | |
Net income | $ 19,651 |
Calculate the indicated ratios for Barry. Round your answers to two decimal places.
Ratio | Barry | Industry Average |
Current | x | 1.59x |
Quick | x | 1.08x |
Days sales outstandinga | days | 28.57 days |
Inventory turnover | x | 7.83x |
Total assets turnover | x | 1.68x |
Profit margin | % | 0.67% |
ROA | % | 1.12% |
ROE | % | 3.66% |
ROIC | % | 7.20% |
TIE | x | 1.69x |
Debt/Total capital | % | 58.63% |
aCalculation is based on a 365-day year. Construct the DuPont equation for both Barry and the industry. Round your answers to two decimal places.
FIRM | INDUSTRY | |
Profit margin | % | 0.67% |
Total assets turnover | x | 1.68x |
Equity multiplier | x | x |
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