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Attribution Non-Commercial (BY-NC)

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6 times Profit margin = 10% Sales = $1,210m ROE = 10% Long-term debt to Long-term debt and equity = 50% Use the above information to complete the balance sheet below. (Enter your answers in millions.)

572 2,068

m m

220 m

1,210

m m m

1,210

Total assets

2,640

2,640

Explanation:

Step 1: Current ratio = 2.6 times = Current assets / $220m => Current assets = 2.6 $220m = $572m Step 2: Profit margin = 10% = Net income / $1,210m => Net income = 0.10 $1,210m = $121m => ROE = 10% = $121m / Total equity => Total equity = $121m / 0.10 = $1,210m Step 3: Long-term debt / Long-term debt and equity = 50% => 0.50(Long-term debt + $1,210m) = Longterm debt => (0.50 Long-term debt) + (0.50 $1,210m) = Long-term debt => $605m = (1 0.50) Longterm debt => Long-term debt = $605m / (1 0.50) = $1,210m Step 4: Total liabilities & equity = Current liabilities + Long-term debt + Stockholders equity = $220m + $1,210m + $1,210m = $2,640m = Total assets Step 5: Fixed assets = Total assets Current assets = $2,640.0m $572m = $2,068.0m

Mandesa, Inc., has current liabilities of $8,600,000, current ratio of 2.0 times, inventory turnover of 12 times, average collection period of 30 days, and credit sales of $64,000,006. Calculate the value of cash and marketable securities. (Use 365 days a year. Round your intermediate calculations and final answer to the nearest dollar amount.) Cash and marketable securities rev: 03_13_2012 $

6,606,392 4

Explanation:

Current assets Current ratio = 2.0 times = $8,600,000 $64,000,006 Inventory turnover = 12 times = Inventory Accounts receivable 365 days Average collection period (ACP) = 30 days = $64,000,006 => Accounts receivable = 30 $64,000,006 / 365 = $5,260,274 => Cash and marketable securities = $17,200,000 $5,333,334 $5,260,274 = $6,606,392 => Inventory = $64,000,006 / 12 = $5,333,334 Current assets = 2.0 $8,600,000 = => $17,200,000

Brendas Bar and Grill has current liabilities of $20 million. Cash makes up 20 percent of the current assets and accounts receivable makes up another 50 percent of current assets. Brendas current ratio is 2.0 times. Calculate the value of inventory listed on the firms balance sheet. (Enter your answer in millions of dollars rounded to 2 decimal places.) Value of inventory $

12.00

Explanation:

Current ratio = 2.0 = Current assets / $20m => Current assets = 2.0 $20m = $40.0m Cash = 0.20 $40.0m = $8.00m Accounts receivable = 0.50 $40.0m = $20.00m => Inventory = $40.0m $8.00m $20.00m = $12.00m Current ratio = 2.3 times Credit sales = $730m Average collection period = 60 days

Inventory turnover = 1.25 times Total asset turnover = 0.50 times Debt ratio = 75% Use the above information to complete the balance sheet below. (Enter your answer in millions. Round your answers to the nearest whole million. Use 365 days a year.)

Cash Accounts receivable Inventory Current assets Fixed assets Total assets

285

665

120

584

m m m m

989

471

1,095

365

1,460

1,460

Explanation:

Step 1: Current ratio = 2.30 times = Current assets / $430m => Current assets = 2.30 $430m = $989m Step 2: Average collection period = 60 days = (Accounts receivable 365) / $730m => Accounts receivable = (60 $730m) / 365 = $120m Step 3: Inventory turnover = 1.25 times = $730m / Inventory => Inventory = $730m / 1.25 = $584m Step 4: Cash = $989m $120m $584m = $285m Step 5: Total asset turnover = 0.50 times = $730m / Total assets => Total assets = $730m / 0.50 = $1,460m Step 6: Fixed assets = $1,460m $989m = $471m Step 7: Debt ratio = 75% = Total debt / $1,460m => Total debt = 0.75 $1,460m = $1,095m Step 8: Stockholders equity = Total liabilities & equity Total debt = $1,460m $1,095m = $ 365m Step 9: Long-term debt = Total debt Current liabilities = $1,095m $430m = $665.m Current ratio = 2.6 times Profit margin = 10% Sales = $1,270m ROE = 10% Long-term debt to Long-term debt and equity = 60% Use the above information to complete the balance sheet below. (Enter your answers in millions.)

728 2,727

m m

280 m

1,905

m m m

1,270

Total assets

3,455

3,455

Explanation:

Step 1: Current ratio = 2.6 times = Current assets / $280m => Current assets = 2.6 $280m = $728m Step 2: Profit margin = 10% = Net income / $1,270m => Net income = 0.10 $1,270m = $127m => ROE = 10% = $127m / Total equity => Total equity = $127m / 0.10 = $1,270m Step 3: Long-term debt / Long-term debt and equity = 60% => 0.60(Long-term debt + $1,270m) = Longterm debt => (0.60 Long-term debt) + (0.60 $1,270m) = Long-term debt => $762m = (1 0.60) Longterm debt => Long-term debt = $762m / (1 0.60) = $1,905m Step 4: Total liabilities & equity = Current liabilities + Long-term debt + Stockholders equity = $280m + $1,905m + $1,270m = $3,455m = Total assets Step 5: Fixed assets = Total assets Current assets = $3,455.0m $728m = $2,727.0m You are thinking of investing in Nikki T's, Inc. You have only the following information on the firm at year-end 2012: net income is $170,000, total debt is $2.60m, and debt ratio is 65 percent. What is Nikki T's ROE for 2012? (Do not round intermediate calculations and round your final answer to 2 decimal places.) ROE

12.14

Explanation:

Debt ratio = 0.65 = $2.60 / Total assets => Total assets = $2.60m / 0.65 = $4.00m => Total equity = $4.00m $2.60m = $1.40m => ROE = $170,000 / $1.40m = 12.14%

Profit margin = 10% Sales = $1,150m ROE = 25% Long-term debt to Long-term debt and equity = 60% Use the above information to complete the balance sheet below. (Enter your answers in millions.)

400 910

m m

160 m

690

m m m

460

Total assets

1,310

1,310

Explanation:

Step 1: Current ratio = 2.5 times = Current assets / $160m => Current assets = 2.5 $160m = $400m Step 2: Profit margin = 10% = Net income / $1,150m => Net income = 0.10 $1,150m = $115m => ROE = 25% = $115m / Total equity => Total equity = $115m / 0.25 = $460m Step 3: Long-term debt / Long-term debt and equity = 60% => 0.60(Long-term debt + $460m) = Long-term debt => (0.60 Long-term debt) + (0.60 $460m) = Long-term debt => $276m = (1 0.60) Long-term debt => Long-term debt = $276m / (1 0.60) = $690m Step 4: Total liabilities & equity = Current liabilities + Long-term debt + Stockholders equity = $160m + $690m + $460m = $1,310m = Total assets Step 5: Fixed assets = Total assets Current assets = $1,310.0m $400m = $910.0m ou have located the following information on Webbs Heating & Air Conditioning: debt ratio is 58 percent, capital intensity is 1.20 times, profit margin is 12.9 percent, and the dividend payout is 29.00 percent. Calculate the sustainable growth rate for Webb. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Sustainable growth rate

22.21 0.1

Explanation:

Equity multiplier = Total assets / Total equity => 1 / Equity multiplier = Total equity / Total assets Debt ratio = Total debt / Total assets = (Total assets Total equity) / Total assets = 1 (Total equity / Total assets) 0.58 = 1 (Total equity / Total assets) => Total equity / Total assets = 1 0.58 = 0.42 = 1 / Equity multiplier => Equity multiplier = 1 / 0.42 = 2.3810 ROE = Profit margin Total asset turnover Equity multiplier = 0.129 1 / 1.20 2.3810 = 25.60% Retention ratio (RR) = 1 Dividend payout ratio = 1 0.29 = 0.71 0.2560 0.71 Sustainable growth rate = 1 (0.2560 0.71) Last year, Stumble-on-Inn, Inc., reported an ROE of 20 percent. The firms debt ratio was 55 percent, sales were $29 million, and the capital intensity was 1.20 times. Calculate the net income for Stumble- on-Inn last year. (Do not round intermediate calculations. Enter your answer in dollars not in millions.) Net income $

3,132,000

= 22.21%

Explanation:

Capital intensity = 1.20 = Total assets / $29m => Total assets = 1.20 $29m = $34.80m => Debt ratio = 0.55 = Total debt / $34.80m => Total debt = 0.55 $34.80m = $19.14m => Total equity = $34.80m $19.14m = $15.66m => ROE = 0.20 = Net income / $15.66m => Net income = 0.20 $15.66m = $3,132,000 You are considering investing in Nuran Security Services. You have been able to locate the following information on the firm: total assets are $24.75 million, accounts receivable are $3.90 million, ACP is 25 days, net income is $4.10 million, and debt-to-equity is 1.20 times. Calculate the ROE for the firm. (Do not round intermediate calculations and round your final answer to 2 decimal places.) ROE

36.44

Explanation:

Debt-to-

= 1.20 = Total debt / Total equity = Total debt / (Total assets Total debt)

equity 1.20 = Total debt / ($24.75m Total debt) => (1.20 $24.75m) 1.20 Total debt = Total debt => $29.70m = 2.2 Total debt => Total debt = $29.70m / 2.2 = $13.50m => Total equity = $24.75m $13.50m = $11.25m => ROE = $4.10m / $11.25m = 36.44%

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