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The Southwick Company has the following balance sheet ($000): Financial Ratios Current ratio .92 Quick ratio .08 Debt-to-equity ratio .79 Evaluate...

chapter 4 evaluation of firm's performance
The Southwick Company has the following balance sheet ($000): Financial Ratios Current ratio ………………. . 1.92 Quick ratio ………………… 1.08 Debt-to-equity ratio …………. . 0.79 Evaluate the impact of each of the following (independent) financial decisions on Southwick’s current, quick, and debt-to-equity ratios: a. The firm reduces its inventories by $500,000 through more efficient inventory management procedures and invests the proceeds in marketable securities. b. The firm decides to purchase 20 new delivery trucks for a total of $500,000 and pays for them by selling marketable securities. c. The firm borrows $500,000 from its bank through a short-term loan (seasonal financing) and invests the proceeds in inventory. d. Southwick borrows $2,000,000 from its bank through a 5-year loan (interest due annually, principal due at maturity) and uses the proceeds to expand its plant. e. The firm sells $2,000,000 (net) in common stock and uses the proceeds to expand itsplant.
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