ch3_pp[1] - Practice Problems for Chapter 3 7. ROE =...

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Practice Problems for Chapter 3 7. ROE = (PM)(TAT)(EM) ROE = (.085)(1.30)(1.35) = .1492 or 14.92% 8. This question gives all of the necessary ratios for the DuPont Identity except the equity multiplier, so, using the DuPont Identity: ROE = (PM)(TAT)(EM) ROE = .1867 = (.087)(1.45)(EM) EM = .1867 / (.087)(1.45) = 1.48 D/E = EM – 1 = 1.48 – 1 = 0.48 9. Decrease in inventory is a source of cash Decrease in accounts payable is a use of cash Increase in notes payable is a source of cash Decrease in accounts receivable is a source of cash Changes in cash = sources – uses = $400 + 580 + 210 – 160 = $1,030 Cash increased by $1,030 17. a. Current ratio = Current assets / Current liabilities Current ratio 2006 = $112,977 / $124,541 = 0.91 times Current ratio 2007 = $118,164 / $107,477 = 1.10 times b. Quick ratio = (Current assets – Inventory) / Current liabilities Quick ratio 2006 = ($112,977 – 62,182) / $124,541 = 0.41 times Quick ratio 2007 = ($118,164 – 64,853) / $107,477 = 0.50 times
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ch3_pp[1] - Practice Problems for Chapter 3 7. ROE =...

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