A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio? 1.b.Reduce the company's days' sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment. 2.d.Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more than one year. 3.e.Issue new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash. 4.a.Use cash to increase inventory holdings. 5.c.Use cash to repurchase some of the company's own stock.

Here in this question, we are required to answer which of the option will increase current ratio.…

Answered: A firm wants to strengthen its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Can you please answer this part c follow up question: c) Suppose the initial £90,000 is raised by borrowing at the risk-free interest rateinstead of issuing equity. What are the cash flows to equity and debt holders, andwhat is the initial value of the levered equity according to Modigliani and Miller’sPropositions? Is the company’s cost of equity the same as before? Overall, can thecompany raise the same amount of capital as before? Explain your reasoning.
Flingen Inc. reveals the following information in their annual report for FY 2021 Selected Income Statement Items: Sales $10,500,000 Cost of goods sold $5,500,000 Pretax earnings $650,000 Selected Balance Sheet Items: Merchandise inventory $800,000 Total assets $2,500,000 Upper management plans to cut cost of goods sold by 4.5% for the coming year but retain the same sales and weeks of inventory. What is the return on assets estimated to be for 2022? Group of answer choices 33.7% 32.1% 36.8% 34.1%
Net Income (NI) could be thought of as earnings available for dividends to equity shareholders, assuming none is needed to sustain current operations without further growth. So, let us assume NI will be $500 in year 1 and $525 in year two. Then, the company expects to sell this division for $3,000 at the end of year 3. If the discount rate is 14%, what is the present value of this business division?
Suppose the profitable company, Hermes, Inc., previously calculated its external financing needs (EFN) to be $18,200,000. What will happen to the EFN if management now decides to decrease the dividend payout ratio from 35.00% to 25.00%? (1) It will increase to some value greater than $18,200,000. (2) It will fall to some value lower than $18,200,000. (3) It will remain at $18,200,000. (4) The answer depends on Hermes, Inc.’s growth rate in sales. (5) The answer depends on Hermes, Inc.’s profit margin.
Consider a retail firm with a net profit margin of 3.15%, a total asset turnover of 1.82, total assets of $44.9 million, and a book value of equity of $17.4 million. c. If, in addition, the firm increased its revenues by 16% (maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE?
As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from increases in liabilities or equity). Consider this case: Green Moose Industries has no debt in its capital structure and has $300 million in assets. Its sales revenues last year were $210 million with a net income of $10 million. The company distributed $1.55 million as dividends to its shareholders last year. What is the firm’s self-supporting, growth rate? (Note: Do not round your intermediate calculations.) 2.90% 0.61% 4.00% 0.52% Which of the following are assumptions of the self-supporting growth model? Check all that apply. The firm must issue the same number of new common shares that it issued last year. Common stock is the firm’s only form of equity.…
Calculating LIFO, FIFO, Income and Cash Flows An acquaintance has proposed the following business plan to you. A local company requires a consistent quantity of a commodity and is looking for a reliable supplier. You could become that reliable supplier. The cost of the commodity is expected to rise steadily over the foreseeable future, but the company is willing to pay more than the price that is current at the time. All you would need to do is make an investment, purchase the inventory and then deliver inventory to the company over the following year. One complication is that the commodity is available for purchase only seasonally, so at the end of every year you would need to purchase the supply for the following year. The customer pays promptly on delivery. An initial cash investment of $62,000 would be used to purchase $50,000 of inventory in December 2019. The remaining cash would be held for liquidity needs. In the following year, you would deliver this inventory to the customer.…
You are building a free cash flow to the firm model. You expect sales to grow from $1 billion for the year that just ended to $1.15 billion five years from now. Assume that the company will not become any more or less efficient in the future. Assume that the company will grow at a constant rate for 5 years, and then at a constant rate of 2.334672% for year 6 and onward after that. Use the following information to calculate the value of the equity on a per-share basis. a. Assume that the company currently has $300 million of net PP&E. b. The company currently has $100 million of net working capital. c. The company has operating margins of 12 percent and has an effective tax rate of 28 percent. d. The company has a weighted average cost of capital of 11 percent. This is based on a capital structure of two-thirds equity and one-third debt. e. The firm has 2 million shares outstanding. Do not round intermediate calculations. Round your answer to the nearest cent. $
If a firm wants to increase its working capital efficiency, it should: Increase its days inventory and days receivable and decrease days payable Decrease days inventory and increase days receivable and days payable Decrease days inventory, days receivable and days payable Decrease days inventory and days receivable and increase days payable Decrease cost of goods sold and interest expense
Please answer MCQ not working required
Loreto Inc. has the following financial ratios: asset turnover = 2.40; net profit margin (i.e., net income/sales) = 5%; payout ratio = 30%; equity/assets = 0.40. a. What is Loreto's sustainable growth rate? b. What is its internal growth rate?
Which of the following decreases the cash holding A.The rising commodity prices increases the value of law material inventoriesby 10% B.A manufacturer decreases production in anticipation of a decrease in demand C.THe frim repurchases its own stocks D.THe corporation has decided to give their customer less time in paying their purchases

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