Answered: Liquity Rate A firm used 1 million in…

Liquity Rate A firm used 1 million in cash to puchase inventory. Will its current ratio rise or fall? Will its quick ratio rise or fall? Please cplain both.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 8P

See similar textbooks

Related questions

Q: A Prepare common size statement Gross sales Sales return Sales Discount Net sales Cos Selling…

A: Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational…

Q: Current Ratio. What effect would the following actions have on a firm's current ratio? Assume that…

A: The current ratio is a financial metric that measures a company's ability to cover its short-term…

Q: Which one of the following statements is correct? Multiple Choice O O O O O If the total debt ratio…

A: Financial ratios serve as valuable tools for understanding a company's financial position,…

Q: Estimate its cost of common equity, Maxell and Associcates recently hired you. Obtain the following…

A: The question is based on the calculation of share value based on the constant growth dividend…

Q: Suppose a company has a days sales outstanding (DSO) that is considerably higher than itsindustry…

A: DSO tells about the days in which a firm will receive cash from its debtors for the sales made.

Q: You have the following information about Burgundy Basins, a sink manufacturer. Equity shares…

A: As per the given information: Average-risk investment costing - $54 millionAnnual ATCF - $5.7…

Q: How much equity would have to be swapped out for debt to increase ROE by 1% assuming that nothing…

A: ROE is the ratio which studies the relation of profit earned and firm’s equity. ROE shows how much…

Q: hen borrowing on a short-term basis and using the funds to create more inventory (by an equal…

A: Current ratio is indicator of short term liquidity of company.

Q: Suppose Micro-Shave growth rate in sales is forecast as 13% rather than 10%. If all ratios stay the…

A: Sales growth rate = 13% s0 = $3000 million A0*/ S0 = 66.666% L0*/ S0 = 6.667% Profit margin (M) =…

Q: a. The current ratio will -Select- -Select- b. The return on stockhd increase vill -Select- decrease…

A: The current ratio is the short term obligation of a company which is paid from its current assets.…

Q: The Stewart Company has $1,288,500 in current assets and $515, 400 in current liabilities. Its…

A: Current assets are those type of assets which are either in cash or can be converted into cash into…

Q: Consider the table given below to answer the following question. Asset value Earnings Year Net…

A: Stock valuation is the process of determining the intrinsic value of a company's stock. Various…

Q: Which of the following statement is least likely to be correct? - The WACC is used to find the…

A: WACC is the weighted average cost of capital. It represents the average cost of capital after tax of…

Q: If accounts receivable increase by R500, inventory increases by R200 and accounts payable increase…

A: Increase in accounts receivables = R500Increase in inventory = R200Increase in accounts payable =…

Q: Asset value Earnings Net investment Free cash flow (FCF) Return on equity (ROE) Asset growth rate…

A: Present value (PV) is the current value of a future sum of money or stream of cash flows given a…

Q: A firm has decided to switch from variables? Assume an inflationary environment. Net profit will: OA…

A: The inventory can be valued using various methods as LIFO, FIFO and weighted average method. FIFO…

Q: 50) Which of the following is true of the acid-test ratio? A) It measures a company's ability to pay…

A: The acid-test ratio, also known as the quick ratio, is a financial metric used to assess a company's…

Q: I need help with 5,7,12, and 18 please 5. Number of days in sales in receivables 7. number of days…

A: Account receivable turnover = credit sales / Average accounts receivable = $10,000,000/…

Q: Assume the following ratios are constant. Total asset turnover Profit margin Equity multiplier…

A: Sustainable growth rate is used to estimate cash flows projections and for taking decision about…

Q: Assume Hayworth corp. has an operating leverage of 4.06 and a financial leverage of 1.33. How much…

A: The ratio analysis refers to the understanding of a company’s performance based on the relationship…

Q: Chart Title 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

A: EBIT stands for earnings before interst and tax. DEPS stands for diluted earning per share. EPS…

Q: The firm's current ratio is 2.1. the firm plans to acquire additional inventory to meet a surge in…

A: The pre-determined proportion of current assets and current liabilities is known as the targeted…

Q: Using the five-way DuPont deconstruction of ROE, what is the ROE for a firm with the following: EBIT…

A: The ROE using the five way dupont analysis is calculated using following equation

Q: Which of the following statements is TRUE? a. According to the DuPont identity, all else held…

A: The statement which is true is, Option A. According to Dupont identity, ROE = ( NI / Sales) * (…

Q: Consider the table given below to answer the following question. Year Asset value Earnings Net…

A: Present value refers to the method of capital budgeting used for evaluating the viability of the…

Q: and all later years. What is the value of the concatenator business? Assume 12% cost of capital. (Do…

A: The value of a company is the total of all its marketable assets. The Modigliani-Miller proportion…

Q: Total asset turnover Profit margin Equity multiplier Payout ratio 2.5 5.2% 1.3 22% "hat is the…

Q: Calculation of FCFE A company has the following information: Earnings before interest and taxes…

A: concept. Free cash flow to equity (FCFE) is a measure of how much cash is available to the equity…

Q: If a company has a current ratio of 1.5:1, what effects will the borrowing of cash by long-term debt…

A: Current ratio- It is ratio of current assets and current liabilities. It shows current assets are…

Q: Which company is more liquid and which company is more solvent? HAL SLB Liquidity Current…

A: The company with higher current ratio and quick ratio is more liquid and the company with lower…

Q: DAS Co. is preparing its financial forecast for next year and its AFN is negative. This means that…

A: The AFN or additional funds needed is a way to determine the actual fund requirement to check…

Q: A company has the following information: Earnings before interest and taxes Interest expense Tax…

A: The free cash flow to equity(FCFE) is calculated using following equation

Q: question: c) Suppose the initial £90,000 is raised by borrowing at the risk-free interest rate…

A: Net Present Value: . The calculation of Net present value involve considering the all gas inflow…

Question

Liquity Rate

A firm used 1 million in cash to puchase inventory.

Will its current ratio rise or fall?

Will its quick ratio rise or fall? Please cplain both.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

fix the red
If the current ratio of Sah Ltd. is 1.75, then borrowing on a short-term basis and using the funds to create more inventory (by an equal amount) would cause the current ratio to increase. Group of answer choices True False
1. How does solvency differ from liquidity? 2. R. Davis Incorporated has a current ratio of 2.00. How would you interpret the current ratio for R. Davis Inc.? 3. Describe the difference in the interpretation of the current and quick ratios. 4. In what way does the cash conversion cycle affect liquidity?
Company A's simple EPS is $1 and diluted EPS is $.50. Company B's simple EPS is $1.5 but his diluted EPS is $.25. What would this tell you about the company? Next, suppose Company A's debt to equity ratio is 2 and Company's B's debt to equity ratio is .5. What would this tell you about the company? Besides profitability, what would the measures about tell you about how the company raises money?
A firm has decided to switch from FIFO to LIFO. Ceteris paribus (all things being equal), what impact will the change in accounting have on the following variables? Assume an inflationary environment. Net profit will: OA increase OB decrease OC not change OD. cannot determine
Eaton Electronic Company's treasurer uses both the capital asset pricing model and the dividend valuation model to compute the cost of common equity (also referred to as the required rate of return for common equity). Assume: Rf Km = 8% = 6% = В D₁ = $0.60 Po = $20 8 = 5% = 1.8 a. Compute K; (required rate of return on common equity based on the capital asset pricing model). Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Ki 0.10% b. Compute Ke (required rate of return on common equity based on the dividend valuation model). Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Ke %
Use the DuPont system and the following data to find return on equity. (Do not roun intermediate calculations. Round your answer to 1 decimal place.) Leverage ratio Total asset turnover Net profit margin Dividend payout ratio Return on equity 2.9 2.7 6.2 % 33.2 % %
please help me understand this :) please thank you :)
Help
What is its free cash flow to equity? Do not round intermediate calculations. Round your answer to the nearest cent.
Here are data on two firms: Equity ($ million) ROC (%) Cost of Capital (%) Debt ($ million) Аспе 140 60 16 10 Арех 440 160 14 11 a-1. Calculate the economic value added? (Do not round intermediate calculations. Enter your answers in millions) Acme Aрех Economic value added milion milion
These are the quotes from the spot market. Citigroup Credit Suisse Deutsche Bank ¥122/€ ¥126/$ $0.99/€ If you have $1,000,000 to arbitrage, your profit is $_____________ (Please keep at least two decimal places.)