Solve all of the following problems: The Smith company has $2,392,500 in current assets and $1,076,625 in current liabilities. Its initial inventory level is $526,350 and it will raise funds as additional notes payable (short-term) and use them to increase inventory. How much can its short-term debt (notes payable) increase so that the company can maintain a current ratio of 2.0? Assume the following information for Brandon Corporation: Sales/Total assets = 1.3 Return on assets (ROA) = 4% Return on equity (ROE) = 7% Calculate the firm’s profit margin and debt-to-capital ratio assuming that the firm uses only debt and common equity, so total assets equal total invested capital. Cooper Industries’ net income is $24,000. Its interest expense is $5,000 and its tax rate is 25%. Its notes payables equal $27,000, long-term debt equals $75,000, and common equity equals $250,000. The firm finances with only debt and common equity. Calculate the firm’s ROE and ROIC. Tanaz Inc. has $17 million in sales. The company’s ROE is 17% and its total assets turnover is 3.2. Common equity on the company’s balance sheet is 50% of its total assets. Find the company’s net income. Thomson Trucking Co. has $12 billion in assets and its tax rate is 25%. The firm’s basic earning power ratio is 10% and its ROA is 5.25%. What is the firm’s times interest earned (TIE) ratio?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 8P

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Question

Solve all of the following problems:

The Smith company has $2,392,500 in current assets and $1,076,625 in current liabilities. Its initial inventory level is $526,350 and it will raise funds as additional notes payable (short-term) and use them to increase inventory. How much can its short-term debt (notes payable) increase so that the company can maintain a current ratio of 2.0?

Assume the following information for Brandon Corporation:

Sales/Total assets = 1.3

Return on assets (ROA) = 4%

Return on equity (ROE) = 7%

Calculate the firm’s profit margin and debt-to-capital ratio assuming that the firm uses only debt and common equity, so total assets equal total invested capital.

Cooper Industries’ net income is $24,000. Its interest expense is $5,000 and its tax rate is 25%. Its notes payables equal $27,000, long-term debt equals $75,000, and common equity equals $250,000. The firm finances with only debt and common equity. Calculate the firm’s ROE and ROIC.

Tanaz Inc. has $17 million in sales. The company’s ROE is 17% and its total assets turnover is 3.2. Common equity on the company’s balance sheet is 50% of its total assets. Find the company’s net income.

Thomson Trucking Co. has $12 billion in assets and its tax rate is 25%. The firm’s basic earning power ratio is 10% and its ROA is 5.25%. What is the firm’s times interest earned (TIE) ratio?

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