Using both the balance sheet (Table 4-4) and the income statement (Table 4-7) for the MLC, answer the following:

Calculate the following ratios for 2013: inventory turnover, fixed asset turnover, and total asset turnover.

In a written explanation, describe what each of these ratios means.

In a brief paragraph, describe how well you believe the MLC is managing its assets

How well is the MLC managing its debt?

Given the profit loss (income statement) and balance sheet for Sam's Sandwich Delivery (Table 4-8), answer the following:

Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.

Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.

Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.

How is financial leverage related to bankruptcy?

What is the relationship among fixed costs, contribution margin, and the break-even point?

Everton Doll Manufacturing Company has the following information. The average doll sales price is $12.00, raw materials for a doll are $4, and it takes 15 minutes to assemble a doll. Production labor is paid $8.00 per hour. Operating expenses are as follows: salaries, $2,500 per week; insurance, $1,200 per quarter; rent, $1,500 per month; and utilities, $800 per month. How many dolls must be sold per month to break even? How many dollars in sales does this represent? What is the contribution margin for each doll sold?

Item Cost Time

Sales price per doll $16.00

Variable Costs

Raw materials 6.00 per doll

Labor 10.00 per hour 15 minutes per doll

Labor 2.00 per doll

Fixed Costs

Salaries $2,400 per week

Insurance 1,500 per quarter

Rent 1,600 per month

Utilities 800 per month

The Rapid Modem Corporation was founded by two engineers who managed to capitalize their firm with $150,000. They were able to raise this money because their test model performed much faster than current modems on the market and they received an initial commitment from a national firm to market their modem. However, a national modem manufacturer beat them to the market, and they found that they had invested $150,000 in obsolete technology. They now find that they have no sales, $500 in cash, and a $2,000 payment due to their creditor on the first of next month. What are the owners' options?

Sandy wants to open a Health Food Store. Her monthly expenses are rent $3,500, utilities of $1,000, insurance of $500, and payroll of $4,250. She estimates that her cost of goods is approximately 55 percent of sales. Sandy would like to make $6,000 a month for herself.

What is Sandys contribution margin?

How much does she need in monthly sales to break even?

How much does she need in monthly sales to make a profit of $6,000?

You want to open up a custom skate board shop. You can sell each skate board for $160. It takes 3 hours to make each skate board. Each skate board maker earns $25 per hour. Each skate board costs $15 in raw materials. You estimate that your fixed costs are $20,000 per month.

What is the contribution margin?

How many skate boards must be sold each month in order to break even?

What is the breakeven dollar amount?

How many skate boards must be sold to earn a $10,000 profit each month?

What is your total monthly revenue if you want to earn a profit of $8,000?

1. Pick a large supermarket or discount retailer.

a. Determine what the average store must sell on an annual and daily basis to maintain the corporations profit margin.

b. Using the corporations income statement, determine the break-even point in dollars for each store.

2. Pick two companies in the same industry.

a. Determine their DOL, DFL, and DCL.

b. What effect does a change in sales have on their operating income?

c. What effect does a change in sales have on earnings per share?

CASE STUDY QUESTIONS

In order to provide competitive bids in the construction industry, how important is it for a contractor like Mark Wheeler to know his labor costs and costs of materials? Why is this knowledge so important to a contractor who builds and modifies items for homes and businesses?

What effect do the business cycle and the general economy have on the construction industry? Explain how a change in home and property values has an impact on people in the construction industry.

Other questions

Compare judgmental, time series, and causal forecasting models.

Jane White has recorded the following sales figures for last year for her business: January, $35,645; February, $35,456; March, $31,270; April, $32,129; May, $34,456; June, $35,256; July, $36,218; August, $35,456; September, $34,250; October, $32,156; November, $30,125; and December, $32,275. She wants to select from one of three models: a three-month moving average, a weighted moving average (she believes that the weights should be 0.2, 0.3, and 0.5), and an exponential smoothing average in which she uses an alpha of 0.2 and an assumed forecast for January of year one of $35,000.

Construct a table that shows each of these forecasts for the current year, and provide the forecast for January of year two.

Develop a linear regression equation to predict future demand from the following data:

Demand 23 24 31 28 29

Year 2008 2009 2010 2011 2012

Write the regression equation.

Predict demand for 2015.

Name the independent variable.

Name the dependent variable.

Your projected sales for the first three months of next year are as follows: January, $15,000; February, $20,000; and March, $25,000. Based on last years data, cash sales are 20 percent of total sales for each month. Of the accounts receivable, 60 percent are collected in the month after the sale, and 40 percent are collected in the second month following the sale. Sales for November of the current year are $15,000 and for December $17,000. You have the following estimated payments: January, $4,500; February, $5,500; and March, $5,200.

Using the format from the pro forma cash budget in Table 6-8, what is your monthly cash budget for January, February, and March?

What role do marketable securities play in current asset management? .

What are the five Cs of credit? How do these serve as a yardstick for credit evaluation?

Jane Marks has a restaurant in which she accepts credit cards and checks. Several of the places that Jane shops now accept debit cards and do not accept checks. Jane's banker explained that a debit card would immediately transfer money into her account, but it would cost $50 per month for the equipment and bank charges. Although she requires proper identification, Jane loses approximately $590 a year as a result of bad checks. She also determined that on average she loses 115 days of interest on all checks because the banks are closed on 11 holidays and weekends (52 weeks times 2 weekend days = 104 + 11 holidays). Jane currently earns 3 percent interest on her bank accounts and accepts an average of $2,000 a day in checks.

What is the total annual cost to Jane for the debit card service?

What is the benefit?

Should Jane implement the system?

Joshuas Lawn Equipment Company gives terms of 2/10, n/30. Joshua has annual credit sales of $500,000 and average accounts receivable of $60,000.

What is Joshuas accounts receivable turnover?

What is Joshuas average daily collection?

What is the relationship between the terms that Joshua is giving and his average daily collection?

You are managing a company that stocks and distributes hardware. The company employs two purchasing agents who receive combined salaries of $90,000. They process six thousand purchase requests per year. Average inventory in storage is $600,000, and the total cost of running the warehouse is $200,000. You are told that the company purchases five thousand hammers per year at a cost of $5.34 per hammer.

Using the EOQ formula, how many hammers should be ordered at one time?

If the hammer vendor stated that it would charge $5.00 per hammer if you ordered two hundred or more at a time, what would you do?

Georgies Bike Shop receives the following trade discounts: 35/25/15. The vendors price list indicates that 35 percent off list price is for purchasing bikes in quantities of 100 or more, 25 percent off list price is for assembling the bikes for customers, and 15 percent is for sales promotion and local advertising.

If the manufacturers list price is $470, what should Georgie pay for each bike if he orders 110 bikes at a time, assembles the bikes, and displays and advertises them?

What is Georgies single equivalent discount rate?

How much will Georgie pay the manufacturer for each bike if he orders ten bikes at a time and takes advantage of the other discounts?

Table 44 Moderadylarge Corporation Consolidated Balce Sheet Moderately Large Corporation Consolidaed Balance Sheet thousands except stare data) Vertical Analysis 2012 Dec 31, 2012 1,427 876 481 126 40 2950 2287 161 5398 26.44% 16.23% 8.91% 233% 0.74% 54.67% 4237% 298% 100.00% THERED Dec.31.2013 ASETS Current assets Cash and casheqivients 1,369 Accounts recriwtie, net 1,048 Luxcotories 1,489 Prepaid expenses and other citat assets 157 Deferred income taxes, net 44 Total areat assets 4,066 Property, plant and epipment, net 3,137 Other assets 168 TOTAL ASELS $ 7.371 LIABLITES AND SHAREHOLDERS EQUITY Current liabilities: Accounts payable 429 Accued compensation and related costs 104 Acredtzes 132 Current portion of long-term debt 89 Total areat lizbilities 754 Long-term debt 2,030 Total liabilitics 3384 Shacholders' equity. Common stock($0.1 pawile)-athorized 4,000,000 starcs, issuedand outstanding 3.500.000 350 Paid inczpital incates of pa 2,415 Retainedeanings 172 Total starcholders' equity 3,987 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7.371 242 98 141 82 563 1830 2393 4.48% 1.82% 261% 1.52% 10.43% 33.90% 44.33% 350 2,415 240 3.005 5398 6.48% 44.74% 4.45% 3.67% 100.00% Table 4-7 Motratty Lage Corporation Consolidated Statement of Earings Consolidated Statement of Eatings (in thousands, except emning per share Horizontal Analysis Dec. 31, 2011 2011-12 Fiscal year endet Dec. 31, 2013 Dec. 31, 2012 $ Net revenues Cash Sales Credit Sites Total Net Reveries 2888 6,046 8,935 2751 525 8,009 246 4,572 7,028 1200% 15.00% 13.97X Cost of Sales Gruss Profit 5,361 3,574 4,405 3,604 3,725 3,303 18.25% 9.10% 1,112 93 122 Salaries Insurance Depreciation General and administrative expenses Subtotalmerating expenses Operating income Interest expense 1,28 1:15 180 489 2022 1,32 10 1,183 116 135 479 1,913 1,691 11 361 6.38% 25.00% 11.11% 32.69% 13.38% 4.64% 0.00% 1,687 1,616 11 1,605 Earnings before income taxes Income takes 1,512 29 1,680 588 4.67% 4.67% 512 983 $ 1,092 $ $ 1,043 4.67% Net Earings $ Pe Common Share Net Earings Basic $ Net Earings Dated $ Weighted average shares attending Basic Duted 0.28 0.25 $ $ 0.31 0.27 $ $ 0.30 0.26 4.67% 4.67% 3,500 4,000 3,500 4,000 3,500 4,000 0.00% 0.00% Table 44 Moderadylarge Corporation Consolidated Balce Sheet Moderately Large Corporation Consolidaed Balance Sheet thousands except stare data) Vertical Analysis 2012 Dec 31, 2012 1,427 876 481 126 40 2950 2287 161 5398 26.44% 16.23% 8.91% 233% 0.74% 54.67% 4237% 298% 100.00% THERED Dec.31.2013 ASETS Current assets Cash and casheqivients 1,369 Accounts recriwtie, net 1,048 Luxcotories 1,489 Prepaid expenses and other citat assets 157 Deferred income taxes, net 44 Total areat assets 4,066 Property, plant and epipment, net 3,137 Other assets 168 TOTAL ASELS $ 7.371 LIABLITES AND SHAREHOLDERS EQUITY Current liabilities: Accounts payable 429 Accued compensation and related costs 104 Acredtzes 132 Current portion of long-term debt 89 Total areat lizbilities 754 Long-term debt 2,030 Total liabilitics 3384 Shacholders' equity. Common stock($0.1 pawile)-athorized 4,000,000 starcs, issuedand outstanding 3.500.000 350 Paid inczpital incates of pa 2,415 Retainedeanings 172 Total starcholders' equity 3,987 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7.371 242 98 141 82 563 1830 2393 4.48% 1.82% 261% 1.52% 10.43% 33.90% 44.33% 350 2,415 240 3.005 5398 6.48% 44.74% 4.45% 3.67% 100.00% Table 4-7 Motratty Lage Corporation Consolidated Statement of Earings Consolidated Statement of Eatings (in thousands, except emning per share Horizontal Analysis Dec. 31, 2011 2011-12 Fiscal year endet Dec. 31, 2013 Dec. 31, 2012 $ Net revenues Cash Sales Credit Sites Total Net Reveries 2888 6,046 8,935 2751 525 8,009 246 4,572 7,028 1200% 15.00% 13.97X Cost of Sales Gruss Profit 5,361 3,574 4,405 3,604 3,725 3,303 18.25% 9.10% 1,112 93 122 Salaries Insurance Depreciation General and administrative expenses Subtotalmerating expenses Operating income Interest expense 1,28 1:15 180 489 2022 1,32 10 1,183 116 135 479 1,913 1,691 11 361 6.38% 25.00% 11.11% 32.69% 13.38% 4.64% 0.00% 1,687 1,616 11 1,605 Earnings before income taxes Income takes 1,512 29 1,680 588 4.67% 4.67% 512 983 $ 1,092 $ $ 1,043 4.67% Net Earings $ Pe Common Share Net Earings Basic $ Net Earings Dated $ Weighted average shares attending Basic Duted 0.28 0.25 $ $ 0.31 0.27 $ $ 0.30 0.26 4.67% 4.67% 3,500 4,000 3,500 4,000 3,500 4,000 0.00% 0.00%