L7-ch03-problem3 - 3. Co. requires longer time to collect...

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Problem 3 Balance Sheet Cash 100 AP 500 AR 700 NP 185 Inventories 950 CL 685 CA 1,750 LTD 1,300 TL 1,985 FA 2,500 CS 1,750 RE 515 TA 4,250 4,250 Income Statement Sales 6,500 -CGS 3,800 GP 2,700 -Op. Exp. 1,200 EBIT 1,500 - Int 800 EBT 700 - Tax 280 EAT 420 Industry Average Current ratio 2.35 times Quick ratio 1.40 times Inv TO1.40 times ACP 40 days FATO 2.55 times TATO 1.60 times Debt ratio 38% Times Int. Earned 2.10 times GPM 40.80% OPM 23% NPM 7.2% ROA 11.5% TRUE or FALSE questions 1. Co. can meet S-T obligations easily. 2. Co. may have some difficulties meeting interest expenses.
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Unformatted text preview: 3. Co. requires longer time to collect AR from credit customers. 4. Co. can use FA efficiently. 5. Co. has better profitability that industry average. 6. Industrys interest expense is 11% of sales. 7. Weight of LTD in the capital mix of the CO. is 30% 8. Lower ROA of the Co. is due to higher profitability but lower efficiency. 9. Industrys ROE is more than Co.s ROE due to higher industrys ROA....
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This note was uploaded on 07/11/2011 for the course FINANCE fin 3701 taught by Professor Tengihla during the Spring '11 term at Assumption College.

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