5 percent What is the amount of the firms net fixed assets CA NFA TA So we need

# 5 percent what is the amount of the firms net fixed

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ROE is 18.5 percent. What is the amount of the firm’s net fixed assets? CA + NFA = TA. So, we need to find CA and TA in order to solve for NFA. Current Ratio = CA / CL CA = Current Ratio x CL = 1.25 x \$875 = \$1,093.75 To find total assets, we must first find the total debt and equity from the given information. So, using the profit margin: Profit Margin = Net Income / Sales Net Income = Profit Margin x Sales = 0.095 x \$5,870 = \$549.10 Using the net income figure as an input into ROE to find total equity: ROE = Net Income / Total Equity Total Equity = Net Income / ROE = \$549.10 / 0.185 = \$2,968.11 Long-term debt ratio = 0.45 = Long-term debt / (Long-term debt + Total Equity) Long-term debt = 0.45(Long-term debt + \$2,968.11) 0.55 Long-term debt = \$1,335.65 Long-term debt = \$2,428.45 Total debt = CL + Long-term debt = \$875 + 2,428.45 = \$3,303.45 Total Assets = Total Debt + Total Equity = \$3,303.45 + 2,968.11 = \$6,271.56 Solving the balance sheet identity: Net Fixed Assets = Total Assets – Current Assets = \$6,271.56 – 1,093.75 = \$5,177.81
#5. Some recent financial statements for Smolira Golf Corp. follow: Find the following financial ratios for Smolira Golf Corp. (use year-end figures rather than average values where appropriate): Short-term solvency ratios: a. Current ratio = Current assets / Current liabilities Current ratio for 2008 = \$56,260 / \$38,963 = 1.44 times Current ratio for 2009 = \$60,550 / \$43,235 = 1.40 times b. Quick ratio = (Current assets – Inventory) / Current liabilities Quick ratio for 2008 = (\$56,260 – 23,084) / \$38,963 = 0.85 times Quick ratio for 2009 = (\$60,550 – 24,650) / \$43,235 = 0.83 times c. Cash ratio = Cash / Current liabilities Cash ratio for 2008 = \$21,860 / \$38,963 = 0.56 times Cash ratio for 2009 = \$22,050 / \$43,235 = 0.51 times
Asset utilisation ratios: d. Total asset turnover = Sales / Total assets Total asset turnover = \$305,830 / \$321,075 = 0.95 times e. Inventory turnover = Cost of goods sold / Inventory Inventory turnover = \$210,935 / \$24,650 = 8.56 times f. Receivables turnover = Sales / Accounts receivable Receivables turnover = \$305,830 / \$13,850 = 22.08 times Long-term solvency ratios: g. Total debt ratio = (Total assets – Total equity) / Total assets Total debt ratio for 2008 = (\$290,328 – 176,365) / \$290,328 = 0.39 Total debt ratio for 2009 = (\$321,075 – 192,840) / \$321,075 = 0.40 h. Debt-equity ratio = Total debt / Total equity Debt-equity ratio for 2008 = (\$38,963 + 75,000) / \$176,365 = 0.646 Debt-equity ratio for 2009 = (\$43,235 + 85,000) / \$192,840 = 0.665 i. Equity multiplier = 1 + Debt/Equity Equity multiplier for 2008 = 1 + 0.65 = 1.646 Equity multiplier for 2009 = 1 + 0.66 = 1.665 j. Times interest earned = EBIT / Interest Times interest earned = \$68,045 / \$11,930 = 5.70 times k. Cash coverage ratio = (EBIT + Depreciation) / Interest Cash coverage ratio = (\$68,045 + 26,850) / \$11,930 = 7.95 times Profitability ratios: l. Profit margin = Net income / Sales Profit margin = \$36,475 / \$305,830 = 0.1193 or 11.93% m. Return on assets = Net income / Total assets Return on assets = \$36,475 / \$321,075 = 0.1136 or 11.36% n. Return on equity = Net income / Total equity Return on equity = \$36,475 / \$192,840 = 0.1891 or 18.91% Or ROE = ROA x EM = 11.36% x 1.66 = 18.91% DuPont identity is: ROE = (PM)(TAT)(EM) = (0.1193)(0.95)(1.66) = 0.1891 or 18.91%

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