Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)
Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)
15th Edition
ISBN: 9780134478166
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
Question
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Chapter 3, Problem 3.15P

a)

Summary Introduction

To discuss:

The current ratio, quick ratio, inventories turnover, average collection period and the total assets turnover for each company.

Introduction:

Current ratio: Current ratio which is calculated by dividing current assets from current liabilities shows the ability of the corporation to pay of its current liabilities.

Quick ratio: Quick ratio is used to determine the company’s capability to satisfy dues using only liquid assets. Inventory is excluded from this ratio to show liquidity in better manner and it is also known as acid-test ratio.

Inventory turnover: Inventory turnover which reflects the number of times average inventory is converted into sales during a period is an asset management ratio that tells the manager how effectively they are managing the firm.

Average collection period: Average collection period evaluates the number of days required by the firm to collect its credit.

Total Assets Turnover Ratio: Total assets turnover ratio examines how effectively the asset of a firm is utilized.

b)

Summary Introduction

To determine:

Liquidity position.

Introduction:

Current ratio: Current ratio which is calculated by dividing current assets from current liabilities shows the ability of the corporation to pay of its current liabilities.

Quick ratio: Quick ratio is used to determine the company’s capability to satisfy dues using only liquid assets. Inventory is excluded from this ratio to show liquidity in better manner and it is also known as acid-test ratio.

c)

Summary Introduction

To determine:

Analyzing average collection period of receivables.

Introduction:

Average collection period: Average collection period evaluates the number of days required by the firm to collect its credit.

d)

Summary Introduction

To determine:

Analyzing inventory turnover and total assets turnover.

Introduction:

Inventory turnover: Inventory turnover which reflects the number of times average inventory is converted into sales during a period is an asset management ratio that tells the manager how effectively they are managing the firm.

Total Assets Turnover Ratio: Total assets turnover ratio examines how effectively the asset of a firm is utilized.

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Scenario one: Under what circumstances would it be appropriate for a firm to use different cost of capital for its different operating divisions? If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are two techniques you could use to develop a rough estimate for each division’s cost of capital?
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Chapter 3 Solutions

Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)

Ch. 3.4 - To assess the firms average collection period and...Ch. 3.5 - What is financial leverage?Ch. 3.5 - What ratio measures the firms degree of...Ch. 3.6 - What three ratios of profitability appear on a...Ch. 3.6 - Prob. 3.15RQCh. 3.6 - Prob. 3.16RQCh. 3.7 - What do the price/earnings (P/E) ratio and the...Ch. 3.8 - Financial ratio analysis is often divided into...Ch. 3.8 - Prob. 3.19RQCh. 3.8 - What three areas of analysis are combined in the...Ch. 3 - For the quarter ended January 28, 2017, Kroger...Ch. 3 - Learning Goals 3, 4, 5 ST3-1 Ratio formulas and...Ch. 3 - Prob. 3.2STPCh. 3 - Prob. 3.1WUECh. 3 - Learning Goal 1 E3-2 Explain why the income...Ch. 3 - Prob. 3.3WUECh. 3 - Learning Goal 3 E3-4 Bluestone Metals Inc. is a...Ch. 3 - Learning Goal 6 E3-5 If we know that a firm has a...Ch. 3 - Financial statement account identification Mark...Ch. 3 - Learning Goal 1 P3-2 1ncome statement preparation...Ch. 3 - Prob. 3.3PCh. 3 - Learning Goal 1 P3-4 Calculation of EPS and...Ch. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Learning Goals 1 P3-7 Initial sale price of common...Ch. 3 - Prob. 3.8PCh. 3 - Learning Goal 1 P3-9 Changes In stockholders...Ch. 3 - Learning Goals 2, 3, 4, 5 P3-10 Ratio comparisons...Ch. 3 - Learning Goal 3 P3-11 Liquidity management Bauman...Ch. 3 - Prob. 3.12PCh. 3 - Inventory management Three companies that compete...Ch. 3 - Accounts receivable management The table below...Ch. 3 - Prob. 3.15PCh. 3 - Learning Goal 4 P3-16 Debt analysis Springfield...Ch. 3 - Prob. 3.17PCh. 3 - Learning Goals 2, 3, 4 P3-18 Using Tables 3.1,...Ch. 3 - Learning Goals 5 P3-19 Common-size statement...Ch. 3 - The relationship between financial leverage and...Ch. 3 - Learning Goal 4 P3-21 Analysis of debt ratios...Ch. 3 - Learning Goal 6 P3-22 Ratio proficiency McDougal...Ch. 3 - Learning Goal 6 P3-23 Cross-sectional ratio...Ch. 3 - Learning Goal 6 P3-24 Financial statement analysis...Ch. 3 - Learning Goals 6 P3- 25 Integrative: Complete...Ch. 3 - Learning Goal 6 P3-26 DuPont system of analysis...Ch. 3 - Learning Goal 6 P3-27 Complete ratio analysis,...Ch. 3 - Spreadsheet Exercise The income statement and...
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