Homework 2 - Homework 2 CEE 498 Construction Management...

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Homework 2 CEE 498: Construction Management Russel, Fall 2008 University of Wisconsin – Madison Problem 1 1
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From the handout: 2
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Quick Ratio = Total Quick Assets / Current Liabilities = 943,864/632,124 = 1.49  > 1 (Good Liquidity) Current Ratio = Total Current Assets / Total Current Liabilities =  994290/632124 = 1.57 > 1 (Good Liquidity) Collection Period = Accounts Receivable * 365 / Annual Sales Revenue =  321,258/1825449 = 64 days > 60 Days (too long collection period) Net Profit / Tangible Net Worth = 227,209/290,354*100 = 78.3% Net Profit / Total Assets = 227,209/1,022,478*100 = 22.2% Net Sales / Tangible Net Worth = 1,825,449/290,354= 6.287 Net Sales / Working Capital = 1,825,449/(994,290 – 632,124) = 5.0403 General and Administrative Expenses / Tangible Net worth = 363,421/290,354  = 1.25165 > .6 (Spends too much on Gen and Admin Expenses). Fixed Assets / Tangible Net Worth = 28,188/290,354*100 = 9.7% Total Liabilities / Tangible Net Worth = 1,022,478/290,354= 3.52149 Hard Debt / Tangible Net Worth = 100,000/290,354= 0.344407 Ratios that deserve some attention Collection Period :  It is longer than our 60 day allowance Net Sales / Tangible Net Worth :  Should be 10 – 15, but it is 6.  Means that sales  are not high compared to the worth of the company, meaning low capital  investment. General and Administrative Expenses / Tangible Net Worth:   Company spends  too much on General and Administrative expenses. Hard Debt / Tangible Net:   Should be between 1 and 2, meaning the Company  doesn’t have too much Hard debt These 4 ratios fall outside the ranges for a healthy company as defined by the  attachment (3).  Baker Electric needs to work on covering current liabilities by  3
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Homework 2 - Homework 2 CEE 498 Construction Management...

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