
EBK FUNDAMENTALS OF CORPORATE FINANCE
9th Edition
ISBN: 8220103675925
Author: BREALEY
Publisher: YUZU
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Chapter 23, Problem 17QP
Summary Introduction
To discuss: The best alternative.
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Question 3
Footfall Manufacturing Ltd. reports the following financial
information at the end of the current year:
Net Sales
$100,000
Debtor's turnover ratio (based on 2
net sales)
Inventory turnover ratio
1.25
Fixed assets turnover ratio
0.8
Debt to assets ratio
0.6
Net profit margin
5%
Gross profit margin
25%
Return on investment
2%
Use the given information to fill out the templates for income
statement and balance sheet given below:
Income Statement of Footfall Manufacturing Ltd. for the year ending
December 31, 20XX
(in $)
Sales
100,000
Cost of goods
sold
Gross profit
Other expenses
Earnings
before
tax
Tax @50%
Earnings
after
tax
Balance Sheet of Footfall Manufacturing Ltd. as at December 31, 20XX
(in $)
Liabilities
Amount
Assets
Amount
Equity
Net fixed assets
Long term 50,000
Inventory
debt
Short term
debt
Debtors
Cash
TOTAL
TOTAL
Toodles Inc. had sales of $1,840,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $1,180,000, $185,000 and $365,000 respectively. In addition, the company had an interest expense of $280,000 and a tax rate of 35 percent. (Ignore any tax loss carry-back or carry-forward provisions.) Arrange the financial information for Toodles Inc. in an income statement and compute its OCF?
All computations must be done and shown manually. Kindly no spreadsheetcomputations. So that I am able to follow and understand clearly please.
Jingle Ltd. and Bell Ltd. belong to the same industry. A snapshot of
some of their financial information is given below:
Jingle
Ltd.
Bell
Ltd.
Current ratio
3.2 1
2 1
Acid-test ratio
1.7 1
1.1 1
Debt Equity ratio
30%
40%
Times interest earned
6
5
You are a loans officer and both companies have asked for an equal
2-year loan.
i)
ii)
If you could facilitate only one loan, which company would
you refuse? Explain your reasoning briefly
If both companies could be facilitated, would you be willing
to do so? Explain your argument briefly.
Chapter 23 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
Ch. 23 - Prob. 1QPCh. 23 - Prob. 2QPCh. 23 - Prob. 3QPCh. 23 - Prob. 4QPCh. 23 - Prob. 5QPCh. 23 - Prob. 6QPCh. 23 - Prob. 7QPCh. 23 - Prob. 8QPCh. 23 - Prob. 9QPCh. 23 - Prob. 10QP
Ch. 23 - Prob. 11QPCh. 23 - Prob. 12QPCh. 23 - Prob. 13QPCh. 23 - Prob. 14QPCh. 23 - Prob. 15QPCh. 23 - Prob. 16QPCh. 23 - Prob. 17QPCh. 23 - Prob. 18QPCh. 23 - Prob. 22QPCh. 23 - Prob. 23QPCh. 23 - Prob. 24QPCh. 23 - Prob. 25QPCh. 23 - Prob. 26QPCh. 23 - Prob. 27QPCh. 23 - Prob. 28QPCh. 23 - Prob. 29QPCh. 23 - Prob. 30QPCh. 23 - Prob. 31QP
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