Chapter 4 Study Problems

Chapter 4 Study Problems - Allen Corporation Sales Total...

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Allen Corporation (Figures in million dollars) Sales $65 Total assets $42 Total liabilities $20 Interest rate 6% Tax rate 30% Operating Profit margin 12% Operating profit (EBIT) = sales *operating profit margin ratio =$ 65*12% = Interest = Total liabilities* Interest rate =$20*6%= $1.20 Earning before tax (EBT) =Operating profit -Interest =$7.8-$1.2 = $6.60 Tax = Earning before tax (EBT) *tax rate =$6.60*30% = $1.98 Net income = Earning before tax (EBT) -tax =$6.60-$1.98= $4.62 Operating return on assets = Operating income/total assets =EBIT/Assets*100 = equity =Total asses-total liabilities = $42-$20 =$22 Return on equity =Net income/ Equity *100 =$4.62/$22*100= 21 21%
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$7.80 =$7.80/$42*100= 18.57
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Average Collection Period Credit Sales 562,500 (9,000,000x.75) = 6750000 562,500*365/6,750,000 205312500 30.42 Average Collection Period = 30.42 Or 30 Days 6,750,000*20= 135000000 B.) Average Collection = 365 days * AR/6,750,000 =20 135000000 369863.01 New Accounts Receivable $369,863 C.) Inventory Turnover = COGS/Inventory
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This note was uploaded on 08/21/2008 for the course ACC 220 taught by Professor Gross during the Spring '08 term at Herzing.

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Chapter 4 Study Problems - Allen Corporation Sales Total...

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