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Finance ch. 4 - $30.60 What is the firm's inventory...

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13. SCENARIO 4-1 The balance sheet and income statement shown below are for Byrd Inc, and the data are to be used for the following questions. Note that the firm has no amortization charges, it does not lease any assets, and none of its debt must be retired during the next 5 years (notes payable will be rolled over). BALANCE SHEET Cash $ 140.0 Accounts payable $ 800.0 Accts. receivable 880.0 Notes payable 600.0 Inventories 1,320.0 Accruals 400.0 Total current assets $2,340.0 Total current liabilities $1,800.0 Long-term bonds 1,000.0 Total debt $2,800.0 Common stock (50,000 shares) 200.0 Retained earnings 1,000.0 Net plant & equip. 1,660.0 Total common equity $1,200.0 Total assets $4,000.0 Total liabilities & equity $4,000.0 INCOME STATEMENT Net sales $6,000.0 Operating costs 5,599.8 Depreciation 100.2 EBIT $ 300.0 Less: Interest 96.0 EBT $ 204.0 Less: Taxes 81.6 Net income $ 122.4 OTHER DATA Shares outstanding (millions) 60.00 Common dividends $42.8 Interest rate on N/P and long-term bonds 6.0% Federal plus state income tax rate 40% Year-end stock price
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Unformatted text preview: $30.60 What is the firm's inventory turnover? A) 4.41 B) 4.97 C) 4.55 D) 4.69 E) 4.83 Points Earned: 5.0/5.0 Correct Answer(s): C 14. Aaron Aviation recently reported the following information: Net income $500,000 ROA 10% Interest expense $200,000 The company's average tax rate is 40%. What is the company's basic earning power (BEP)? A) 20.67% B) 22.50% C) 14.12% D) 16.67% E) 17.33% Points Earned: 0.0/5.0 Correct Answer(s): A 15. Last year Bell Corp had $200,000 of assets, $300,000 of sales, $20,000 of net income, and a debt-to-total-assets ratio of 40%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets to $150,000. Sales, costs, and net income would not be affected, and the firm would maintain the 40% debt ratio. By how much would the reduction in assets improve the ROE? A) 5.26% B) 4.66% C) 5.86% D) 4.96% E) 5.56% Points Earned: 0.0/5.0 Correct Answer(s): E...
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Finance ch. 4 - $30.60 What is the firm's inventory...

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