Chap_4 - A) 1.75 2. Cleveland Corporation has 100,000...

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1.  Parcells Jets has the following balance sheet (in millions): Cash $   100  Notes payable $   100 Inventories 300  Accounts payable 200 Accounts receivable           400       Accruals           100     Total current assets $   800  Total current liabilities $   400 Net fixed assets 1,200  Long-term bonds           600           Total debt $1,000                           Total common equity     1,000     Total assets $2,000   Total liabilities and equity $2,000 Parcells' DSO is 40, which exceeds the industry average of 30. Assume that Parcells is able to reduce its DSO to the industry average without reducing sales, and the company uses freed-up cash to reduce its outstanding long-term bonds. What will be the new current ratio?
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Unformatted text preview: A) 1.75 2. Cleveland Corporation has 100,000 shares of common stock outstanding, its net income is $750,000, and its P/E is 8. What is the company's stock price? C) $60.00 3. If a bank loan officer were considering a company's request for a loan, which of the following statements would you consider to be CORRECT? D) Other things held constant, the lower the debt ratio, the lower the interest rate the bank would charge the firm. 4. Ruby Corp's sales last year were $435,500, its operating costs were $350,000, and its interest charges were $10,000. What was the firm's times interest earned (TIE) ratio? C) 8.55...
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