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Chapter 4 Assignment Solutions

# Chapter 4 Assignment Solutions - BUS 320 Chapter 4...

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Unformatted text preview: BUS 320 Chapter 4 Assignment Solutions Sales 1. Inv. T/O = --------- Inv. 2,400 Use Profit Margin: .12 = ---------- ; so, Sales = \$20,000 Sales 9,500 – Inv. Use Quick Ratio: 1.5 = ------------------- ; so, Inv. = \$5,000 3,000 \$20,000 So, Inv T/O = ------------ = 4.0 \$5,000 EBIT EBIT 2. TIE = ------------ = --------------------- Interest (.10)(1,200,000) Set up partial Income Statement: EBIT 920,000 - Interest 120,000 = EBT 800,000 (600,000 / 1 - .25) - Tax (25%) 200,000 = Net Income 600,000 (.06)(10,000,000) 920,000 So, TIE = ------------ = 7.67 120,000 Net Income \$50,000 3. ROE = ---------------- = --------------- Total Equity Total Equity 600,000 Use Debt Ratio: .60 = --------------- ; so, Total Assets = \$1,000,000 Total Assets TA = TD + TE 1,000,000 = 600,000 + TE ; so, TE = \$400,000 50,000...
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Chapter 4 Assignment Solutions - BUS 320 Chapter 4...

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