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HW_4_Questions_Chapters_20_21[1]

# HW_4_Questions_Chapters_20_21[1] - Homework 4 Chapter 20 1...

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Homework 4 Chapters 20, 21 Chapter 20 1. Starpucks last year had a current ratio of 1.5 where as the industry had a current ratio of 1.8. This year they have a current ratio of 1.9 and the industry current ratio improved to 1.9. The number of days of inventory last year was 30 days and this year it is 40 days where as the industry’s number of days of inventory was 27 days and this year it is 30 days. Explain how Starpucks is doing in terms of liquidity and inventory. Table 1 Credit Sales 40,000 Cost of goods sold 30,000 Accounts Receivable 3,000 Inventory Beginning Balance 1,500 Inventory Ending Balance 2,000 Accounts Payable 4,000 Based on Table 1, answer questions 2-4. 2. Calculate the number of days of inventory. 3. Calculate the number of days of receivables. 4. Calculate the operating cycle. 5. Your company wants to borrow 5 million dollars for one month. You are head of the short-term investments of your company and must make a decision which is the best offer. a. Line of credit at 6.5% with a ½% commitment fee. b. A banker’s acceptance at 6.75%, all inclusive rate. c. Commercial paper at 6.15% with a dealer’s commission of 1/8% and a backup line cost of ¼%, both of which would be assessed on the \$5 million of commercial paper issued. 6. Use the following info to calculate the z-score and comment on whether this company has good credit. EBIT/total assets=.20 Sales/assets=2.0 Market equity/book=3.4 Retained earnings/total assets=.5 Working capital/assets=.15 7. Company X sells on a 1/20 net 60, basis. Customer Y buys goods with an invoice of \$1,000.

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