EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
bartleby

Videos

Question
Book Icon
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
Check Mark

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(Nochange)

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

Debt-to-equity ratio=TotaldebtTotalequity=$4,750$6,000=0.79(Nochange)

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
Check Mark

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 assetsInventoriesCurrent liabilities=$5,250$2,500$3,000=0.92(Decrease)

Debt-to-equity ratio=TotaldebtTotalequity=$4,750$6,000=0.79(Nochange)

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
Check Mark

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 assetsInventoriesCurrent liabilities=$6,250$3,000$3,500=0.93(Decrease)

Debt-to-equity ratio=TotaldebtTotalequity=$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
Check Mark

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(Nochange)

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

Debt-to-equity ratio=TotaldebtTotalequity=$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
Check Mark

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(Nochange)

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

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

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
(Financing decisions) Brussels Electronics, Inc, has total assets of $64 million and total debt of $45 million. The company also has operating profits of $23 millions with interest expenses of $7 million. a. What is Brussels Electronic's debt ratio? b. What is Brussels Electronic's time interest earned? c. Based on the information above, would you recommend to Brussels Electron-ics's management that the firm is in a strong enough position to assume more debt and increase interest expense to $9 million?
You have completed a first pass of a pro-forma balance sheet for Farmer Company. This reveals external financing need of $12 million. The pro-forma income statement shows a Net Income of $100 million and traditionally the firm has paid 40% of its earnings in the form of dividends (which is currently reflected in your pro-forma financials). What payout ratio would eliminate the external financing need of the firm?
You have been asked by your employers to demonstrate your knowledge in business valuation process, by analyzing the value of Best Group Savings and Loans Company (BGSLC). The company paid a dividend of GH¢ 250,000 this year. The current return to shareholders of companies in the same industry as BGSLC is 12%, although it is expected that an additional risk premium of 2% will be applicable to BGSLC, being a smaller and unquoted company. Compute the expected valuation of BGSLC, if: The current level of dividend is expected to continue into the foreseeable future The dividend is expected to grow at a rate 4% par into foreseeable future The dividend is expected to grow at a 3% rate for three years and 2% afterwards
Knowledge Booster
Background pattern image
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Text book image
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Text book image
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Text book image
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Text book image
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Text book image
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License