CHAPTER 3-3

CHAPTER 3-3 - CHAPTER 3 WORKING WITH FINANCIAL STATEMENTS...

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CHAPTER 3 WORKING WITH FINANCIAL STATEMENTS Solutions to Questions and Problems NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and readability constraints, when these intermediate steps are included in this solutions manual, rounding may appear to have occurred. However, the final answer for each problem is found without rounding during any step in the problem. Basic 1. Using the formula for NWC, we get: NWC = CA – CL CA = CL + NWC = \$3,720 + 1,370 = \$5,090 So, the current ratio is: Current ratio = CA / CL = \$5,090/\$3,720 = 1.37 times And the quick ratio is: Quick ratio = (CA – Inventory) / CL = (\$5,090 – 1,950) / \$3,720 = 0.84 times 2. We need to find net income first. So: Profit margin = Net income / Sales Net income = Sales(Profit margin) Net income = (\$29,000,000)(0.08) = \$2,320,000 ROA = Net income / TA = \$2,320,000 / \$17,500,000 = .1326 or 13.26% To find ROE, we need to find total equity.
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This note was uploaded on 07/15/2010 for the course FINANCE 318 taught by Professor Spurlin during the Spring '08 term at LA Tech.

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