CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 2, Problem 19PROB
Summary Introduction
EWD's 60% of assets are financed with common equity. Its current ratio is 5, total assets turnover is 4, current assets equal to $150,000, and sales are $1,800,000. Long-term liabilities and current liabilities to be calculated.
The total asset turnover ratio is the efficiency ratio which is used to measure how much sales is generated by using the firm's total assets.
Current ratio is one of the liquidity ratios which is used to measure the short-term ability of the firm to pay the firm's short-term obligations with its current assets.
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Assume an investor deposits $116,000 in a professionally managed account. One year later, the account has grown in value to $136,000 and the investor withdraws $43,000. At the end of the second year, the account value is $107,000. No other additions or withdrawals were made. During the same two years, the risk-free rate remained constant at 3.94 percent and a relevant benchmark earned 9.58 percent the first year and 6.00 percent the second. Calculate geometric average of holding period returns over two years. (You need to calculate IRR of cash flows over two years.)
Round the answer to two decimals in percentage form.
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