Answer d-g Addressing Working Capital Policies and Management.Refer to (b) and the following information about Five Star ManufacturingCompany to solve for (e) and (f).273Five Star expects its earnings before interest and taxes in 20X5 to be 18 percent ofP1,000,000 in sales. Interest rates are projected to remain at 10 percent for short-term debt and 15 percent for long-term debt. The firm's tax rate will be 34 percent.Required:e. What is Five Star's rate of return on equity for each of the three strategies?f. Describe the relationship between Five Star's liquidity and profitability.Use the following information about Five Star Manufacturing Company to solvefor (g).Five Star wants to determine the impact of changing the financing mix when usingan aggressive current asset strategy of having current assets at 30 percent of sales.Earnings before interest and taxes are expected to be P180,000. Short-term interestrates are 10 percent and long-term rates are 15 percent. The firm's tax rate is 34percent. Five Star wants to maintain a mix of 50 percent debt and 50 percent equityunder restricted, compromise and flexible financing strategies as shown below.Five Star Manufacturing CompanyPro Forma Statement of Financial PositionAs of December 31, 20X5Financing Mix StrategiesRestrictedCompromiseFlexibleP300,000P300,000Current assetsP300,000600,000600,000600,000Fixed assetsP900.000P900.000P900.000Total assetsP300,000P450,000P100,000150,000Current liabilities (10%)Long-term liabilities (15%)350,0000P450,000P450,000P450,000Total liabilitiesStockholders' equity450,000450,000450,000Total liabilities andP900.000P900.000P900,000Owners' equityRequired:g. Show the expected return on equity, net working capital and current ratiofor each proposed strategy. Problem 5 (Working Capital)The questions (a) through (g) refer to Five Star Manufacturing Company. Use thefollowing information to solve for (a) and (b).Five Star Manufacturing CompanyStatement of Financial PositionAs of December 31, 20X4CashP 200,000300,000P 20,000 Current Liabilities (10%)30,000 Long-term liabilities (15%)150,000 Total liabilitiesMarketable securitiesAccounts receivableInventoryP 500,000200,000P 400,000P 500,000Total current assetsNet fixed assetsStockholders' equityTotal Liabilities and600,000P1.000.000 Owners' equityP1,000,000Total assetsDuring 20X4, the firm's earnings before interest and taxes were 20 percent ofP800,000 in sales. The income tax rate is 34 percent.Required:Determine the level of working capital, net working capital and currentratio.b. Calculate the return on equity (net income/stockholders' equity).Use the following information about Five Star Manufacturing Company to solvefor (c) and (d).Five Star Manufacturing Company decides to examine its working capital policy.In addition to its current strategy of maintaining current assets at 50 percent ofsales, Five Star is considering two other strategies based on current assets at 30 or70 percent of next year's sales. Projected net sales and fixed assets for next yearare P1,000,000 and P600,000, respectively. Five Star plans to maintain its existingcapital structure of 50 percent debt and 50 percent equity. Current liabilities are tobe 40 percent of projected total liabilities.Required:c. Calculate Five Star's net working capital and current ratio under each ofthe three strategies.d.Explain what effect these strategies would have on five Star's liquidity.

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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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Why is this formula very important F = P( I + i)?
1 . A n g e l i n e M a e d e l a C r u z h a s j u s t g r a d u a t e d f r o m c o l l e g e a n d n e e d s t o b u y a c a r t o c o m m u t e t o w o r k . S h e e s t im a t e s t h a t s h e ca n a f fo r d t o p a y a b o u t P 1 4 , 5 0 0 . 0 0 p e r m o n t h f o r a l oa n o r l e a s e a n d h a s a b o u t P 2 0 0 , 0 0 0. 0 0 i n s a v i n g s t o u s e f o r a d o w n p a y m e n t . • D e v e l o p a p l a n t o g u i d e h e r t h r o u g h h e r f i r s t c a r - b u y i n g e x p e r i e n c e , i n c l u d i n g r e s e a r c h i n g c a r t y p e , d e c i d i n g w he t h e r t o b u y a n e w o r u s e d c a r , n e g o t i a t i n g t h e p r i c e a n d t e r m s , a n d f i n a n c in g t h e t r a n s a c t i o n 2 . F i n d t h e m o n t h l y m o r t g a g e p a y m e n t s o n t h e…
Common sized statement need help on part a finding the %
Joint processing costs up to the split-off point total $75,000 per quarter. The company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows: Product Selling Price 5 per pound Quarterly Output 10,000 pounds A $ B $ 7 per pound 22,000 pounds C $ 11 per gallon 5,000 gallons Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below: Additional Product Processing Costs Selling Price A $ 53,000 $ 8 per pound B $ 38,000 $ 13 per pound с $ 18,000 $ 20 per gallon Which products should be processed further?
Define Profi t and loss (P&L) statement
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1. A-n-n-a- -M-a-r-i-e- -R-o-m--a-n- -r-e-c-e-n-t-l-y- -g-r-a-d-u-a-t-e-d- -f-r-o-m- -c-o-l-l-e-g-e- -a-n-d- -i-s- -e-v-a-l-u-a-t-i-n-g-- t-w-o- -c-r-e-d-i-t- -c-a-r-d-s-.- -C-a-r-d- -A- -h-a-s- -a-n-n-u-a-l- -f-e-e- -o-f P7,500 a-n-d- -a-n- -i-n-t-e-r-e-s-t- -r-a-t-e- -o-f 9%. C-a-r-d- -B- -h-a-s- -n-o- -a-n-n-u-a-l- -f-e-e- -a-n-d- -a-n- -i-n-t-e-r-e-s-t- -r-a-t-e- -o-f 16%. A-s-s-u-m-i-n-g- -t-h-a-t- -A-n-n-a- -M-a-r-i-e- -i-n-t-e-n-d-s- -t-o- -c-a-r-r-y- -n-o- -b-a-l-a-n-c-e- -a-n-d- -p-a-y- -o-f-f- -h-e-r- -c-h-a-r-g-e-s- -i-n- -f-u-l-l- -e-a-c-h- -m-o-n-t-h-,- -w-h-i-c-h- -c-a-r-d- -r-e-p-r-e-s-e-n-t-s- -t-h-e -b-e-t-t-e-r- -d-e-a-l-?- -I-f- -A-n-n-a- -M-a-r-i-e- e-x-p-e-c-t-e-d- -t-o- -c-a-r-r-y- -a- -s-i-g-n-i-f-i-c-a-n-t- -b-a-l-a-n-c-e- -f-r-o-m- -o-n-e- -m-o-n-t-h- -t-o- -t-h-e- -n-e-xt-,- -w-h-i-c-h- -c-ar-d- -w-o-u-l-d- -b-e- -b-e-t-t-e-r-?- -E-x-p-l-a-i-n- 2. -W-h-a-t- -i-s- -y-o-u-r- -o-p-i-n-i-o-n- -a-b-o-u-t- -u-s-i-n-g- -c-o-n-s-u-m-e-r-s- -l-o-a-n-s- -a-n-d-…
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A, B, C
WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows: A) B) Product X yes yes no no Units produced Per unit sales value at split-off Added processing costs per unit Per unit sales value if processed further The cost of the joint raw material input is $90,000. Which of the products should be processed beyond the split-off point? Product Y yes no yes yes Product X 2,700 $ 25.00 $ 2.00 $31.00 Product Z no yes no yes Product Y 3,200 $ 28.00 $ 4.00 $31.00 Product Z 4,200 $ 27.00 $4.00 $36.00
Answer each of the following independent question: a and b
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