Foundations of Finance (9th Edition) (Pearson Series in Finance)
9th Edition
ISBN: 9780134083285
Author: Arthur J. Keown, John D. Martin, J. William Petty
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 4, Problem 1SP
Summary Introduction
To determine: The level of inventories the firm can carry without reducing the current ratio to 2.0.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Awkward Inc. currently has $2,145,000 in current assets and $858 in current liabilities. The company's managers want to increase the firm inventory, which will be financed by short-term note with the bank. What level of inventories can the firm carry without its current ratio falling below 2.0?
This is an example prioblem. I need help understanding the math that is being done?
The Nelson Company has $1,125,000 in current assets and $450,000 in current liabilities. Its initial inventory level is $325,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 2.2? Do not round intermediate calculations. Round your answer to the nearest dollar.
$
What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Do not round intermediate calculations. Round your answer to two decimal places.
Chapter 4 Solutions
Foundations of Finance (9th Edition) (Pearson Series in Finance)
Ch. 4 - Describe the five-question approach to using...Ch. 4 - What are the limitations of industry average...Ch. 4 - What is the difference between a firms gross...Ch. 4 - Prob. 9RQCh. 4 - Prob. 11RQCh. 4 - Prob. 1SPCh. 4 - (Evaluating profitability) The Malia Corporation...Ch. 4 - (Evaluating profitability) Last year, Stevens,...Ch. 4 - (Price/ book) Chang, Inc.s balance sheet shows a...Ch. 4 - Prob. 5SP
Ch. 4 - (Ratio analysis) The balance sheet and income...Ch. 4 - (Analyzing operating return on assets) The D.A....Ch. 4 - (Evaluating liquidity) The Tabor Sales Company had...Ch. 4 - (Evaluating current and proforma profitability)...Ch. 4 - (Financial analysis) The T. P. Jarmon Company...Ch. 4 - (Economic Value Added) K. Johnson, Inc.’s managers...Ch. 4 - Prob. 16SPCh. 4 - Prob. 17SPCh. 4 - Prob. 18SPCh. 4 - Prob. 1MCCh. 4 - Prob. 2MCCh. 4 - Prob. 3MCCh. 4 - Prob. 4MC
Knowledge Booster
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
- The Nelson Company has $1,485,000 in current assets and $495,000 in current liabilities. Its initial inventory level is $365,000, and it will raise funds as additional notes payable and use them to increase inventory. A. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 2.0? Do not round intermediate calculations. Round your answer to the nearest dollar. B. What will be the firms's quick ratio after Nelson has raised the maximum amount of short-term funds? do not round intermediate calculations. Round your answer to two decimal places.arrow_forwardBhupatbhaiarrow_forwarda) What is the optimal transaction size? b) What should be Rosal's average cash balance? c) What is the total cost?arrow_forward
- Please helparrow_forward(Liquidity analysis) The Mitchem Marble Company has a target current ratio of 2.1 but has experienced some difficulties financing its expanding sales in the past few months. At present, the firm has a current ratio of 2.7 and current assets of $2.15 million. If Mitchem expands its receivables and inventories using its short-term line of credit, how much additional short-term funding can it borrow before its current ratio standard is reached? ... The additional amount of receivables and inventories (short-term debt) is $ = |million. (Round to two decimal places.)arrow_forward(Evaluating liquidity) The Allen Marble Company has a target current ratio of 2.0 but has experienced some difficulties financing its expanding sales in the past few months. At present, the firm has current assets of $2.5 million and a current ratio of 2.5. If Allen expands its receivables and inventories using its short-term line of credit, how much additional short-term funding can it borrow before its current ratio standard is reached? The addition to current assets is $ (Round to the nearest dollar.)arrow_forward
- The Nelson Company has $1,400,000 in current assets and $500,000 in current liabilities. Its initial inventory level is $330,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 1.8? Do not round intermediate calculations. Round your answer to the nearest dollar.arrow_forwardThe Nelson Company has $1,228,500 in current assets and $455,000 in current liabilities. Its initial inventory level is $305,000, and it will raise funds as additional notes payable and use them to increase inventory. How much can Nelson's short-term debt (notes payable) increase without pushing its current ratio below 2.0? Do not round intermediate calculations. Round your answer to the nearest dollar. $ ___________ What will be the firm's quick ratio after Nelson has raised the maximum amount of short-term funds? Do not round intermediate calculations. Round your answer to two decimal places. Quick ratio _________________arrow_forwardThe following information pertains to Striker Corporation, together with its DSO/ACP of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO/ACP to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day year. Sales=P110,000; Accounts receivable= P16,000; Days sales outstanding (DSO/ACP)= 53.09; Benchmark days sales outstanding (DSO/ACP)=20.00 * P 8,078 O P 8,975 P 9,973 P10,970 P12,067arrow_forward
- Tinberg Cans expects sales next year to be $50,000,000. Inventory and accounts receivable (combined) will increase $8,000,000 to accommodate this sales level. The company has a profit margin at 6%. Its dividend payout is 30% of profit. How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.arrow_forwardThe company has sales of $ 10 million per year, all of which are from credit terms that require payment to be made within 30 days, and the company's account receivables amount to $ 2 million. What is the DSO of the company, what is the value if all borrowers pay on time, and how much capital will be released if the company takes actions that lead to timely payment?arrow_forwardBNB bank estimates that its total revenues will amount to $350 million, and its total expenses (including taxes) will equal $220 million this year. Its liabilities total $3,800 million while its equity capital amounts to $110 million. What is the bank's return on assets? Is this ROA high or low? How could you find out?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning