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

Info icon This preview shows pages 1–2. Sign up to view the full content.

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 c. Cash ratio = Cash / Current liabilities
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 2
This is the end of the preview. Sign up to access the rest of the document.
  • Fall '08
  • Selvili
  • Balance Sheet, Generally Accepted Accounting Principles, $15,183, $16,185, $255,592

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern