Vockery Market Co. Balance Sheet 2018 2017 Cash 20,000 24,000 ST Investments 18,000 26,000 Net Accounts Receivable 50,000 78,000 Inventory 70,000 66,000 Prepaid Expenses 12,000 10,000 Total Current Assets 170,000 204,000 PP&E 105,000 85,000 Total Assets 275,000 289,000 Total Current Liabilities 130,000 120,000 Income Statement: Net Sales 478,000 Cost of Goods Sold 318,000 Compute the following ratios: Current ratio Acid-test ratio Inventory turnover
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
Vockery Market Co.
| 2018 | 2017 | |
| Cash | 20,000 | 24,000 |
| ST Investments | 18,000 | 26,000 |
| Net |
50,000 | 78,000 |
| Inventory | 70,000 | 66,000 |
| Prepaid Expenses | 12,000 | 10,000 |
| Total Current Assets | 170,000 | 204,000 |
| PP&E | 105,000 | 85,000 |
| Total Assets | 275,000 | 289,000 |
| Total Current Liabilities | 130,000 | 120,000 |
| Income Statement: | ||
| Net Sales | 478,000 | |
| Cost of Goods Sold | 318,000 |
Compute the following ratios:
| Acid-test ratio |
| Inventory turnover |
| Days' sales in inventory |
| Days' sales in receivables |
| Gross profit percentage |
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