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Homework #3 - Homework#3 CEE 498 1 Quick Ratio = Total...

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Homework #3 CEE 498 1) Quick Ratio = Total Quick Assets / Current Liabilities 943,846/632,124 = 1.493 > 1 good liquidity. Current Ratio = Total Current Assets / Total Current Liabilities 994,290/632,124 = 1.573 > 1 good liquidity. Collection Period = (Accounts Receivable*365) / Annual Sales Revenue ((321,258 + 2439)365) / 1,825,499 = 64.7 > 60 days collection period is longer than desired but very close Net Profit/Tangible Net Worth = 144,067/(1,022,478 – 632,124) = 36.9% Net Profit/Total Assets = 144,067/1,022,478 = 14% Net Sales/Tangible Net Worth = 1,825,449/(1,022,478 – 632,124) = 4.67 Net sales/Working Capital = 1,825,449/(994,290 – 632,124) = 5.04 General & Administrative Expenses/Tangible Net Worth 363,421/ (1,022,478-632,124) = .931 Fixed Assets/Tangible Net Worth = 28,188 / 390,354 = 7.2% this is acceptable Total Liabilities/Tangible Net Worth = 632,124 / 390,354 = 1.62 Hard Debt/ Tangible Net worth = 100,00 / 390,354 = .256 Overall, it appears that the company is in OK financial shape. Some of their ratios are less than desirable, but most of them are acceptable. 2) The five C’s of underwriting are: Character, Capital, Capacity, Continuity, and Communication. The character of a contractor is his/her previous actions that
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reveal their common business practices.
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