WEEK TWO

1. (Evaluating liquidity) The Tabor Sales Company had a gross profit margin (gross profits divided by sales) of 30.8 percent and sales of $9.3 million last year. Seventy-five percent of the firm's sales are on credit and the remainder are cash sales. Tabor's current assets equal $2.5 million, its current liabilities equal $288,000 and it has $103, 000 in cash plus marketable securities.

a. If Tabor's accounts receivable are $562,500 what is its average collection period? (Round to two decimal places.) ANSWER:

b. If Tabor reduces its average collection period to 21 days, what will be its new level of accountsreceivable? ANSWER:

c. Tabor's inventory turnover ratio is 9.3 times. What is the level of Tabor's inventories? ANSWER:

2. (Economic value added) Drew Concrete uses Economic Value Added as a financial performance measure. Drew has $260 million in assets, and the firm has financed its assets with 65% equity and 35% debt with an interest rate of 55%. The firm's opportunity cost on its funds is 16%, while the operating return on the firm's assets is 11 %.

a. What is the Economic Value Added created or destroyed by Drew Concrete? Enter a positive number for EVA created or a negative number for EVA destroyed. (Round to one decimal place.) ANSWER:

b. What does Economic Value Added measure? ANSWER:

PLEASE ANSEWR EACH QUESTION FULLY AND CORRECTLY!!!