million and ils on as net income? 3. If a firm is able to sustain the same level of operations in terms of sales and administrative expenses but reduces its materials cost by $50,000 through smarter purchases, what is the profit-leverage effect on gross profits? What is the profit- leverage effect on profits before taxes? 4. If a firm's cost of goods sold is $2.5 million and its average inventory is $500,000, what is the inventory turnover?
million and ils on as net income? 3. If a firm is able to sustain the same level of operations in terms of sales and administrative expenses but reduces its materials cost by $50,000 through smarter purchases, what is the profit-leverage effect on gross profits? What is the profit- leverage effect on profits before taxes? 4. If a firm's cost of goods sold is $2.5 million and its average inventory is $500,000, what is the inventory turnover?
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
Related questions
Question
Answer questions 2-7 please
Transcribed Image Text:SPREADSHEET PROBLEMS
1. If a firm's net income (profits before taxes) is $120,000 and it has total assets of $1.5
million, what is its return on assets?
2. If a firm's total assets is $2.5 million and its return on assets is 12 percent, what is its
net income?
3. If a firm is able to sustain the same level of operations in terms of sales and
administrative expenses but reduces its materials cost by $50,000 through smarter
purchases, what is the profit-leverage effect on gross profits? What is the profit-
leverage effect on profits before taxes?
4. If a firm's cost of goods sold is $2.5 million and its average inventory is $500,000, what
is the inventory turnover?
5. If a firm's cost of goods sold is $5 million and its inventory turnover is ten times, what
is the average inventory?
6. If a firm's inventory turnover is eight times and its average inventory is $160,000, what
is the cost of goods sold?
7. A retailer in Las Vegas has an ending inventory of $250,000 as of December 31, 2016,
and the following accounting information.
ENDING INVENTORY
COST OF GOODS SOLD
MONTH
January
February
March
April
May
June
July
August
September
October
November
December
$225,000
$325,000
$240,000
$325,000
$460,000
$220,000
S85,000
$156.000
$220,000
$265,000
$100,000
$350.000
$1.200,000
$1.250,000
$1,350,000
$1,500,000
$950,000
$850,00
$1.650,000
$1,325,000
$1,750,000
$850,000
$2,200,000
$3.500.000
a. Compute the monthly inventory turnover ratio for each of the twelve months,
b. What are the annual cost of goods sold and the average inventory for the year?
c. Compute the annual inventory turnover ratio. How is the retailer's performance
compare to the industry standard, assuming its business is similar to Walmart's?
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