BUS355MGT FINHW #2.docVIP

BUS 355 MANAGERIAL FINANCE Dr. Chris R. Crumley, Spring, 2011 Due date: Examination # 2 HOMEWORK # 2 Chapter 7 (The following information applies to the next six Problems.) Roberts Manufacturing Balance Sheet December 31, 2006 (Dollars in Thousands) Cash $ 200 Accounts payable $ 205 Receivables 245 Notes payable 425 Inventory 625 Other current liabilities 115 Total current assets $1,070 Total current liabilities $ 745 Net fixed assets 1,200 Longterm debt 420 Common equity 1,105 Total assets $2,270 Total liabilities and equity $2,270 Roberts Manufacturing Income Statement for Year Ended December 31, 2006 (Dollars in Thousands) Sales $2,400 Cost of goods sold: Materials $1,000 Labor 600 Heat, light, and power 89 Indirect labor 65 Depreciation 80 1,834 Gross profit $ 566 Selling expenses 175 General and administrative expenses 216 Earnings before interest and taxes (EBIT) $ 175 Less interest expense 35 Earnings before taxes (EBT) $ 140 Less taxes (40%) 56 Net income (NI) $ 84 1. Calculate the liquidity ratios, that is, the current ratio and the quick ratio. a. 1.20; 0.60 b. 1.20; 0.80 c. 1.44; 0.60 d. 1.44; 0.80 e. 1.60; 0.60 2. Calculate the asset management ratios, that is, the inventory turnover ratio, fixed assets turnover, total assets turnover, and days sales outstanding. a. 2.93; 2.00; 1.06; 36.75 days d. 2.93; 2.00; 1.24; 34.10 days b. 2.93; 2.00; 1.06; 35.25 days e. 2.93; 2.20; 1.48; 34.10 days c. 2.93; 2.00; 1.06; 34.10 days 3. Calculate the debt management ratios, that is, the debt and timesinterestearned ratios. a. 0.39; 3.16 b. 0.39; 5.00 c. 0.51; 3.16 d. 0.51; 5.00 e. 0.73; 3.16 4. Calculate the profitability ratios, that is, the net profit margin on sales, return on total assets, and return on common equity. a. 3.50%; 4.25%; 7.60% d. 3.70%; 3.50%; 8.00% b. 3.50%; 3.70%; 7.60% e. 4.25%; 3.70%; 7.60% c. 3.70%; 3.50%