Jordan Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 280,000 Total CL $ 70,000 Total CA $ 364,000 Long-term debt 140,000 Net fixed assets 126,000 Common equity 280,000 Total assets $ 490,000 Total liab. and equity $ 490,000 Sales $ 280,000 Net income $ 21,000 The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.15, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change? Do not round your intermediate calculations. a. 9.84 p.p. b. 2.34 p.p. c. 13.95 p.p. d. 31.58 p.p. e. 24.08 p.p. The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) 2021 Assets Cash and securities $ 4,200 Accounts receivable 17,500 Inventories 20,300 Total current assets $ 42,000 Net plant and equipment 28,000 Total assets $ 70,000 Liabilities and Equity Accounts payable $ 27,531 Accruals 12,369 Notes payable 5,000 Total current liabilities $ 44,900 Long-term bonds 9,000 Total liabilities $ 53,900 Common stock 3,864 Retained earnings 12,236 Total common equity $ 16,100 Total liabilities and equity $ 70,000 Income Statement (Millions of $) 2021 Net sales $ 112,000 Operating costs except depreciation 104,160 Depreciation 2,240 Earnings before interest and taxes (EBIT) $ 5,600 Less interest 840 Earnings before taxes (EBT) $ 4,760 Taxes (25%) 1,190 Net income $ 3,570 Other data: Shares outstanding (millions) 500.00 Common dividends (millions of $) $1,249.50 Int. rate on notes payable & L-T bonds 6% Federal plus state income tax rate 25% Year-end stock price $85.68 What is the firm's current ratio? Do not round your intermediate calculations. a. 0.54 b. 1.05 c. 0.48 d. 1.29 e. 0.94

Jordan Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 280,000 Total CL $ 70,000 Total CA $ 364,000 Long-term debt 140,000 Net fixed assets 126,000 Common equity 280,000 Total assets $ 490,000 Total liab. and equity $ 490,000 Sales $ 280,000 Net income $ 21,000 The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.15, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change? Do not round your intermediate calculations. a. 9.84 p.p. b. 2.34 p.p. c. 13.95 p.p. d. 31.58 p.p. e. 24.08 p.p. The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) 2021 Assets Cash and securities $ 4,200 Accounts receivable 17,500 Inventories 20,300 Total current assets $ 42,000 Net plant and equipment 28,000 Total assets $ 70,000 Liabilities and Equity Accounts payable $ 27,531 Accruals 12,369 Notes payable 5,000 Total current liabilities $ 44,900 Long-term bonds 9,000 Total liabilities $ 53,900 Common stock 3,864 Retained earnings 12,236 Total common equity $ 16,100 Total liabilities and equity $ 70,000 Income Statement (Millions of $) 2021 Net sales $ 112,000 Operating costs except depreciation 104,160 Depreciation 2,240 Earnings before interest and taxes (EBIT) $ 5,600 Less interest 840 Earnings before taxes (EBT) $ 4,760 Taxes (25%) 1,190 Net income $ 3,570 Other data: Shares outstanding (millions) 500.00 Common dividends (millions of $) $1,249.50 Int. rate on notes payable & L-T bonds 6% Federal plus state income tax rate 25% Year-end stock price $85.68 What is the firm's current ratio? Do not round your intermediate calculations. a. 0.54 b. 1.05 c. 0.48 d. 1.29 e. 0.94

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Jordan Inc. has the following balance sheet and income statement data:

Cash	$	14,000	Accounts payable	$	42,000
Receivables		70,000	Other current liabilities		28,000
Inventories		280,000	Total CL	$	70,000
Total CA	$	364,000	Long-term debt		140,000
Net fixed assets		126,000	Common equity		280,000
Total assets	$	490,000	Total liab. and equity	$	490,000

Sales	$	280,000
Net income	$	21,000

The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.15, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change? Do not round your intermediate calculations.

a. 9.84 p.p.

b. 2.34 p.p.

c. 13.95 p.p.

d. 31.58 p.p.

e. 24.08 p.p.

The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $)	2021
Assets
Cash and securities		$	4,200
Accounts receivable			17,500
Inventories			20,300
Total current assets		$	42,000
Net plant and equipment			28,000
Total assets		$	70,000

Liabilities and Equity
Accounts payable		$	27,531
Accruals			12,369
Notes payable			5,000
Total current liabilities		$	44,900
Long-term bonds			9,000
Total liabilities		$	53,900
Common stock			3,864
Retained earnings			12,236
Total common equity		$	16,100
Total liabilities and equity		$	70,000

Income Statement (Millions of $)	2021
Net sales		$	112,000
Operating costs except depreciation			104,160
Depreciation			2,240
Earnings before interest and taxes (EBIT)		$	5,600
Less interest			840
Earnings before taxes (EBT)		$	4,760
Taxes (25%)			1,190
Net income		$	3,570

Other data:
Shares outstanding (millions)			500.00
Common dividends (millions of $)		$1,249.50
Int. rate on notes payable & L-T bonds			6%
Federal plus state income tax rate			25%
Year-end stock price			$85.68

What is the firm's current ratio? Do not round your intermediate calculations.

a. 0.54

b. 1.05

c. 0.48

d. 1.29

e. 0.94

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