FIN504 week 2 problems.xlsx - net profits before tax Tax...

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net profits before tax 436000 Tax rate 40% pref. stock dividend 64000 outstand. Shares 170000 A. 1.16 436000x.40 174400 436000-174400=261600 197600/170000=1.16 B. $61600.00 170000x.80=61600
A. B. C. D. Different ratios are considered acceptable based on the type of industry. An investor would want to make comparisions to the industry average for those ratios to determine if the company is under or over performing. These ratios represent the liquidity of the company. The quick ratio takes into consideration inventory as well. The electric company and fast food company would expect lower ratios because they move their inventory quickly based on the nature of the business. Whereas the software company and car company expect to move inventory slower leading to higher ratio's. The electric company could be a much larger enterprise with the ability to finance and cover debt obligations with better ease than the software company. The software company may also have more competition in the market, making them a riskier investment. Having a higher debt ratio would add to that risk. Investors look for a portfolio that has a mix of high and low risk. They expect a return on their investment. Investing all of their money in what is considered a high risk venture, could lead to high returns if projections are correct but it could also lead to a loss of their entire investment. Investing in companies that may be viewed as less profitable, but lower risk, gives them more of a guarantee of a return on their investment.
2012 2013 2014 2015 Total current assets 16950 21900 22500 27000 Total current liabilities 9000 12600 12600 17400 Inventory 6000 6900 6900 7200 A. Current ratio 1.88 1.74 1.79 1.55 Quick ratio 1.82 1.19 1.23 1.13 Work for Ques. A 16950/9000=1.88 21900/12600=1.74 22500/12600=179 27000/17400=1.55 16950-6000=10950 10950/9000=1.21 21900-6900=15000 15000/12600=1.19 22500-6900=15600 15600/12600=1.23 27000-7200=19800 19800/17400=1.13 B. C. The ratios have deceased from 2012 to 2013 reflecting less liquidity in the firm. This relates to their ability to pay their bills. They are well below the industry average for this ratio, however, at times they seem to trend like the industry. For example, from 2012-2013 they had a growth in the turnover, which the industry reflected as well. From 2013-2014 they reflected growth while

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