Assignment #2 answers

Assignment #2 answers - Answers to Assignment No 2 Chapter...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Answers to Assignment No. 2 Chapter 17- Questions and Problems: Answer to Q 8 a. High asset turnover means high sales relative to assets. The consulting firm will have relatively few assets. The major “asset” is the know-how of its employees, which is not measured on its balance sheet. It will have the higher asset turnover ratio. Stelco, by contrast, has significant balance sheet assets and will have a lower asset turnover. It takes a lot of fixed assets (equipment, buildings etc.) to manufacture steel. b. Catalog shopping will generate far more sales relative to assets than a traditional retailer. The online retailer does not have to sell goods from stores, reducing its fixed assets relative to bricks-and-mortar stores. Catalog stores probably can also maintain relatively lower inventories. Its asset turnover ratio will be higher. c. The supermarket has a far higher ratio of sales to assets. The supermarket itself is a simple building and the store sells a high volume of goods with relatively low mark-ups (profit margins). Its asset turnover will be the highest of all the companies in this question. An electric utility produces electricity and requires large fixed assets, including power generating facilities and transmission lines. Answer to Q 13 Average collection period equals average receivables divided by daily sales: Average collection period = 6333 9800/365 = 236 days Answer to Q 15 Days’ sales in inventory = Inventory Annual cost of goods sold/365 Annual cost of goods sold = $10,000 365/30 = $121,667 Inventory turnover = 121,667 10,000 = 12.167 times per year.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Answer to Q 17 a. ROA = Asset turnover Net profit margin = 3 0.05 = 0.15 = 15% b. If debt/equity = 1, then debt = equity, so total assets are twice equity. ROE =
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 6

Assignment #2 answers - Answers to Assignment No 2 Chapter...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online