The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

Question

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Answer 1

Question

Chapter 3, Problem 20P

a)

Summary Introduction

To discuss: The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

a)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92 (No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,000$3,000=1.25 (Increase)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

b)

Summary Introduction

To discuss: The impact, when firm purchases 20 new trucks with $500,000 paying through by selling the marketable securities.

b)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,250$3,000=1.75(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,250−$2,500$3,000=0.92(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

c)

Summary Introduction

To discuss: The impact, when firm borrows the amount of $500,000 from bank as a short-term loan and invests on inventory.

c)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$6,250$3,500=1.79(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$6,250−$3,000$3,500=0.93(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$5,250$6,000=0.88 (Increase)

d)

Summary Introduction

To discuss: The impact, when company borrows the amount of $2,000,000 from bank as a five-year loan and has invested to expand its plant.

d)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$6,750$6,000=1.13(Increase)

e)

Summary Introduction

To discuss: The impact, when company sale its common stock amounted to $2,000,000 and used the proceeds to expand its plant.

e)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$4,750$8,000=0.59(Decrease)

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Citibank is a US Bank which lost US$500 million due to human error in August 2020. Read the case noted in the link below, and answer the following questions: https://finopsinfo.com/investors/citis-900m-blunder-casts-light-on-poor-loan-ops/ Develop a risk management programme appropriate for this case (use attached template) Explain how compliance to this risk management programme can prevent the operation risk issue experienced by Citibank. Discuss the importance of an internal risk assessment and auditing process in relation to this case Step 1 Risks Brief description & how it relates to the case Step 2 List of possible risks Likelihood/Probability of occurrenceH/M/L or Nil Impact (if occurred)H/M/L or Nil What is being done about it now What more can be done about it Dept. where risk exposure exists Step 3 Risk identified Impact (if occurred)H/M/L Probability of occurrenceH/M/L Dept. where risk…

Citibank is a US Bank which lost US$500 million due to human error in August 2020. Read the case noted in the link below, and answer the following questions: https://finopsinfo.com/investors/citis-900m-blunder-casts-light-on-poor-loan-ops/ Develop a risk management programme appropriate for this case (use attached template) Explain how compliance to this risk management programme can prevent the operation risk issue experienced by Citibank. Discuss the importance of an internal risk assessment and auditing process in relation to this case Step 1 Risks Brief description & how it relates to the case Step 2 List of possible risks Likelihood/Probability of occurrenceH/M/L or Nil Impact (if occurred)H/M/L or Nil What is being done about it now What more can be done about it Dept. where risk exposure exists Step 3 Risk identified Impact (if occurred)H/M/L…

Citibank is a US Bank which lost US$500 million due to human error in August 2020. Read the case noted in the link below, and answer the following questions: https://finopsinfo.com/investors/citis-900m-blunder-casts-light-on-poor-loan-ops/ Develop a risk management programme appropriate for this case (use attached template) Explain how compliance to this risk management programme can prevent the operation risk issue experienced by Citibank. Discuss the importance of an internal risk assessment and auditing process in relation to this case

Answer 2

Question

Chapter 3, Problem 20P

a)

Summary Introduction

To discuss: The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

a)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92 (No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,000$3,000=1.25 (Increase)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

b)

Summary Introduction

To discuss: The impact, when firm purchases 20 new trucks with $500,000 paying through by selling the marketable securities.

b)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,250$3,000=1.75(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,250−$2,500$3,000=0.92(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

c)

Summary Introduction

To discuss: The impact, when firm borrows the amount of $500,000 from bank as a short-term loan and invests on inventory.

c)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$6,250$3,500=1.79(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$6,250−$3,000$3,500=0.93(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$5,250$6,000=0.88 (Increase)

d)

Summary Introduction

To discuss: The impact, when company borrows the amount of $2,000,000 from bank as a five-year loan and has invested to expand its plant.

d)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$6,750$6,000=1.13(Increase)

e)

Summary Introduction

To discuss: The impact, when company sale its common stock amounted to $2,000,000 and used the proceeds to expand its plant.

e)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$4,750$8,000=0.59(Decrease)

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Answer 3

Question

Chapter 3, Problem 20P

a)

Summary Introduction

To discuss: The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

a)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92 (No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,000$3,000=1.25 (Increase)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

b)

Summary Introduction

To discuss: The impact, when firm purchases 20 new trucks with $500,000 paying through by selling the marketable securities.

b)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,250$3,000=1.75(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,250−$2,500$3,000=0.92(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

c)

Summary Introduction

To discuss: The impact, when firm borrows the amount of $500,000 from bank as a short-term loan and invests on inventory.

c)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$6,250$3,500=1.79(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$6,250−$3,000$3,500=0.93(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$5,250$6,000=0.88 (Increase)

d)

Summary Introduction

To discuss: The impact, when company borrows the amount of $2,000,000 from bank as a five-year loan and has invested to expand its plant.

d)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$6,750$6,000=1.13(Increase)

e)

Summary Introduction

To discuss: The impact, when company sale its common stock amounted to $2,000,000 and used the proceeds to expand its plant.

e)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$4,750$8,000=0.59(Decrease)

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Answer 4

Question

Chapter 3, Problem 20P

a)

Summary Introduction

To discuss: The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

a)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92 (No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,000$3,000=1.25 (Increase)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

b)

Summary Introduction

To discuss: The impact, when firm purchases 20 new trucks with $500,000 paying through by selling the marketable securities.

b)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,250$3,000=1.75(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,250−$2,500$3,000=0.92(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

c)

Summary Introduction

To discuss: The impact, when firm borrows the amount of $500,000 from bank as a short-term loan and invests on inventory.

c)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$6,250$3,500=1.79(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$6,250−$3,000$3,500=0.93(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$5,250$6,000=0.88 (Increase)

d)

Summary Introduction

To discuss: The impact, when company borrows the amount of $2,000,000 from bank as a five-year loan and has invested to expand its plant.

d)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$6,750$6,000=1.13(Increase)

e)

Summary Introduction

To discuss: The impact, when company sale its common stock amounted to $2,000,000 and used the proceeds to expand its plant.

e)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$4,750$8,000=0.59(Decrease)

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Answer 5

Chapter 3, Problem 20P

a)

Summary Introduction

To discuss: The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

a)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92 (No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,000$3,000=1.25 (Increase)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

b)

Summary Introduction

To discuss: The impact, when firm purchases 20 new trucks with $500,000 paying through by selling the marketable securities.

b)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,250$3,000=1.75(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,250−$2,500$3,000=0.92(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

c)

Summary Introduction

To discuss: The impact, when firm borrows the amount of $500,000 from bank as a short-term loan and invests on inventory.

c)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$6,250$3,500=1.79(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$6,250−$3,000$3,500=0.93(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$5,250$6,000=0.88 (Increase)

d)

Summary Introduction

To discuss: The impact, when company borrows the amount of $2,000,000 from bank as a five-year loan and has invested to expand its plant.

d)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$6,750$6,000=1.13(Increase)

e)

Summary Introduction

To discuss: The impact, when company sale its common stock amounted to $2,000,000 and used the proceeds to expand its plant.

e)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$4,750$8,000=0.59(Decrease)

Answer 6

Chapter 3, Problem 20P

a)

Summary Introduction

To discuss: The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

a)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92 (No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,000$3,000=1.25 (Increase)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

Answer 7

Chapter 3, Problem 20P

a)

Summary Introduction

To discuss: The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

Answer 8

a)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92 (No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,000$3,000=1.25 (Increase)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

b)

Summary Introduction

To discuss: The impact, when firm purchases 20 new trucks with $500,000 paying through by selling the marketable securities.

b)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,250$3,000=1.75(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,250−$2,500$3,000=0.92(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

Answer 13

b)

Summary Introduction

To discuss: The impact, when firm purchases 20 new trucks with $500,000 paying through by selling the marketable securities.

Answer 14

b)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,250$3,000=1.75(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,250−$2,500$3,000=0.92(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$4,750$6,000=0.79 (No change)

Answer 15

b)

Expert Solution

Answer 16

b)

Expert Solution

Answer 17

Expert Solution

Answer 18

c)

Summary Introduction

To discuss: The impact, when firm borrows the amount of $500,000 from bank as a short-term loan and invests on inventory.

c)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$6,250$3,500=1.79(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$6,250−$3,000$3,500=0.93(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$5,250$6,000=0.88 (Increase)

Answer 19

c)

Summary Introduction

To discuss: The impact, when firm borrows the amount of $500,000 from bank as a short-term loan and invests on inventory.

Answer 20

c)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$6,250$3,500=1.79(Decrease)

Quick ratio=Current assets−InventoriesCurrent liabilities=$6,250−$3,000$3,500=0.93(Decrease)

Debt-to-equity ratio=Total debtTotal equity=$5,250$6,000=0.88 (Increase)

Answer 21

c)

Expert Solution

Answer 22

c)

Expert Solution

Answer 23

Expert Solution

Answer 24

d)

Summary Introduction

To discuss: The impact, when company borrows the amount of $2,000,000 from bank as a five-year loan and has invested to expand its plant.

d)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$6,750$6,000=1.13(Increase)

Answer 25

d)

Summary Introduction

To discuss: The impact, when company borrows the amount of $2,000,000 from bank as a five-year loan and has invested to expand its plant.

Answer 26

d)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$6,750$6,000=1.13(Increase)

Answer 27

d)

Expert Solution

Answer 28

d)

Expert Solution

Answer 29

Expert Solution

Answer 30

e)

Summary Introduction

To discuss: The impact, when company sale its common stock amounted to $2,000,000 and used the proceeds to expand its plant.

e)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$4,750$8,000=0.59(Decrease)

Answer 31

e)

Summary Introduction

To discuss: The impact, when company sale its common stock amounted to $2,000,000 and used the proceeds to expand its plant.

Answer 32

e)

Expert Solution

Explanation of Solution

Calculation of Current ratio, Quick ratio and Debt-to-equity ratio:

Current ratio=Current assetsCurrent liabilities=$5,750$3,000=1.92(No change)

Quick ratio=Current assets−InventoriesCurrent liabilities=$5,750−$2,500$3,000=1.08(No change)

Debt-to-equity ratio=Total debtTotal equity=$4,750$8,000=0.59(Decrease)

Answer 33

e)

Expert Solution

Answer 34

e)

Expert Solution

Answer 35

Expert Solution

Answer 36

Ch. 3 - Prob. 1QTD Ch. 3 - Prob. 2QTD Ch. 3 - Prob. 3QTD Ch. 3 - Prob. 4QTD Ch. 3 - Prob. 5QTD Ch. 3 - Prob. 6QTD Ch. 3 - Prob. 7QTD Ch. 3 - Prob. 8QTD Ch. 3 - Prob. 9QTD Ch. 3 - Prob. 10QTD

The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

Videos

To discuss: The impact when firm reduces its inventories by $500,000 and invests in marketable securities.

Explanation of Solution

To discuss: The impact, when firm purchases 20 new trucks with $500,000 paying through by selling the marketable securities.

Explanation of Solution

To discuss: The impact, when firm borrows the amount of $500,000 from bank as a short-term loan and invests on inventory.

Explanation of Solution

To discuss: The impact, when company borrows the amount of $2,000,000 from bank as a five-year loan and has invested to expand its plant.

Explanation of Solution

To discuss: The impact, when company sale its common stock amounted to $2,000,000 and used the proceeds to expand its plant.

Explanation of Solution

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Chapter 3 Solutions