Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Chapter 14, Problem 5PS
A company’s current ratio is
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Assume that the company has a current ratio of 1.2. Now which of the above actions would improve this ratio. Which of the following actions would improve (i.e., increase) this ratio?• Use cash to pay off current liabilities.• Collect some of the current accounts receivable.• Use cash to pay off some long-term debt.• Purchase additional inventory on credit (i.e., accounts payable).• Sell some of the existing inventory at cost.
Consider the following cash flows:
Year Cash Flow
0 –$7,400
1 2,100
2 4,700
3 1,900
4 1,600
What is the payback period for the cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
2) What is mark-to-market accounting?
a. Hint: Use an example to demonstrate the type of accounting Enron was engaging in.
The following sequence of cash flows will be helpful. Assume a 10% discount rate.
t = 0
t = 1
4,950.00
t = 2
9,680.00
t = 3
(25,000.00)
16,637.50
First, calculate the accounting income for each year (i.e., use historical cost
accounting). Second, calculate the income using Enron's method (i.e., fair value
accounting).
Chapter 14 Solutions
Essentials Of Investments
Ch. 14 - Prob. 1PSCh. 14 - Prob. 2PSCh. 14 - The Crusty Pie Co., which specializes in apple...Ch. 14 - The ABC Corporation has a profit margin on sales...Ch. 14 - A company’s current ratio is 2. If the company...Ch. 14 - Cash flow from investing activities excludes:...Ch. 14 - Cash flow from operating activities includes:...Ch. 14 - Prob. 8PSCh. 14 - Prob. 9PSCh. 14 - Prob. 10PS
Ch. 14 - Prob. 11PSCh. 14 - Use the DuPont system and the following data to...Ch. 14 - A firm has an ROE of 3 , a debt/equity ratio of...Ch. 14 - A firm has a tax burden ratio of 0.75 , a leverage...Ch. 14 - A11 analyst gathers the following information...Ch. 14 - Here are data On two Firms: LO142 Equity ($...Ch. 14 - Prob. 1CPCh. 14 - Which of the following best explains a ratio of...Ch. 14 - Use the Financial statements for Chicago...Ch. 14 - Prob. 4CPCh. 14 - The information in the following table comes from...Ch. 14 - Scott Kelly is reviewing Master Toy’s financial...Ch. 14 - The DuPont formula defines the net return on...Ch. 14 - Go to finance.yahoo.com to find information about...Ch. 14 - Answer the following questions for these two toy...Ch. 14 - Prob. 3WM
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- If a company has a current ratio of 1.5:1, what effects will the borrowing of cash by long-term debt and collection of accounts receivable have on the ratio? Decrease and decrease ) Decrease and no effect Increase and increase Increase and no effectarrow_forwardIf Inland uses its $400 cash balance to pay off $400 of its long-term debt, what will be its new current ratio?(a) 1.68 (b) 2.03(c) 1.35 (d) 3.12arrow_forward1. If current assets amounted to P600,000 and current liabilities amounted to P200,000, what is the current ratio of the entity? *a. P800,000b. P400,000c. 3d. 1/3 3. If net sales is P200,000 and the average accounts receivable is P50,000, what is the accounts receivable turnover ratio? *a. 4b. 1/4c. P150,000d. P250,000 5. If total assets amounted to P800,000 and total liabilities amounted to P200,000, what is the debt to equity ratio? *a. 4b. 0.3333c. 0.25d. 3arrow_forward
- The Quick ratio is measured by (Cash + Receivables) / Current liabilities. Assume this ratio is currently 80% (or 0.8:1) and that the cash balance remains positive at all times. State the effect the following event occurring on the reporting date would have on this ratio. EVENT: Recognising a gain from the cash sale of a non-current asset ✓ [Select] Increase No change Decreasearrow_forwardConsider the following cash flows: Year Cash Flow -$6,600 1,900 3,900 1,700 1,400 What is the payback period for the cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Payback period years 0123 4arrow_forwardWhat is the payback period for the following set of cash flows? (Round your answer to 2 decimal places, e.g., 32.16.) Year Cash Flow 0 –$ 4,700 1 1,200 2 1,400 3 1,800 4 1,300arrow_forward
- What are the annual sales for adorn with $0.5 M in liabilities a total debt ratio of 0.5 and an asset turnover of 4.0 assume assets remain unchanged?arrow_forwardPlease Help! I am struggling so much with this chapter. Instructions: Determine the following measures for 20Y2, rounding to one decimal place including percentages, except for per-share amounts. 1. Working Capital 2. Current Ratio 3. Quick Ratio 4. Accounts Receivable Turnover 5. Number of days' sales in receivables 6. Inventory Turnover 7. Number of days' sales in inventory 8. Ratio of fixed assets to long-term liabilities 9. Ratio of liabilities to stockholder's equity 10. Times interest earned 11. Asset Turnover 12. Return on Total Assets 13. Return on Stockholder's Equity 14. Return on Common Stock 15. Earnings per share on Common Stock 16. Price-earnings ratio 17. Dividends per share of Common Stock 18. Dividend Yieldarrow_forwardI need help with 5,7,12, and 18 please 5. Number of days in sales in receivables 7. number of days in sales in inventory 12. return on total asset 18. dividend yield i have tried working on them myself and nothing appears to be correct. Please help me on these last 4 questions for number these questions i need the answer in dollar amounts as its asking for the current asset-current liabilities=calculated valuearrow_forward
- 5.1 Calculate the Payback Period (expressed in years, months and days). 5.2 Calculate the Accounting Rate of Return on average investment (expressed to two decimal places). 5.3 Identify TWO (2) reasons why the company should not use the accounting rate of return to evaluate capital investments. 5.4 Calculate the Net Present Value. 5.5 Calculate the Internal Rate of Return (expressed to two decimal places) if the net cash flows are R320 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation. INFORMATION Purchase price R1 000 000 Expected useful life 5 years Scrap value 0 Minimum required rate of return 15% Expected net cash inflows: Year 1 R250 000 Year 2 R260 000 Year 3 R300 000 Year 4 R400 000 Year 5 R380 000 Expected net profit: Year 1 R50 000 Year 2 R60 000 Year 3 R100 000 Year 4 R200 000 Year 5 R180 000arrow_forwardWhat is accounts payable turnover?a. Purchases on account divided by average accounts payableb. A measure of liquidityc. A measure of the number of times a year a company is able to pay its accounts payabled. All of the listed answers are correct.arrow_forwardACCOUNTING ASAP Assume the following data: EBIT = 100; Depreciation = 40; Interest = 20; Dividends = 10. Calculate the cash coverage ratio. Select one: a. 7.0x b. 4.7x c. 14.0x d. 5.0xarrow_forward
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