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# Dupont, Liquidity Ratios, Financial Ratios, Leverage Ratios

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Need help on the problems in the attached document.

Label each answer... be specific as possible.....if you'd like you may use bullet items to respond to the questions...

1. Corporate Finance Organization: In a large corporation, what are the two distinct groups that report to the chief financial officer? Which group is the focus of corporate finance?
2. Agency Problems: Who owns a corporation? Describe the process whereby the owners control the firm's management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kinds of problems can arise?
3. International Firm Goal: Would our goal of maximizing the value of the stock be different if we were thinking about financial management in a foreign country? Why or why not?
4. Calculating Liquidity Ratios: SDJ, Inc., has net working capital of \$1,570, current liabilities of \$4,380, and inventory of \$1,875. What is the current ratio? What is the quick ratio?
5. Calculating the Average Collection Period: Pujols Lumber Yard has a current accounts receivable balance of \$387,615. Credit sales for the year just ended were \$2,945,600. What is the receivables turnover? The days' sales in receivables? How long did it take on average for credit customers to pay off their accounts during the past year?
6. Calculating Leverage Ratios: Star Lakes, Inc., has a total debt ratio of .29. What is its debt-equity ratio? What is its equity multiplier?
7. Du Pont Identity: If Roten Rooters, Inc., has an equity multiplier of 1.35, total asset turnover of 1.30, and a profit margin of 8.5 percent, what is its ROE?
8. Calculating Financial Ratios: Based on the balance sheets given for Just Dew It, calculate the following financial ratios for each year:
a. Current ratio
b. Quick ratio
c. Cash ratio
d. NWC to total assets ratio
e. Debt-equity ratio and equity multiplier
f. Total debt ratio and long-term debt ratio

#### Solution Preview

Label each answer... be specific as possible.....if you'd like you may use bullet items to respond to the questions...

1. Corporate Finance Organization: In a large corporation, what are the two distinct groups that report to the chief financial officer? Which group is the focus of corporate finance?
One group concentrates on the record of all accounting transactions, preparation of Management Information Systems report, preparation of balance sheet and profit and loss account on the periodical basis, preparation of cash flow statement and any other report required by CFO from time to time. Other group concentrates on the control aspect like doing internal auditing regularly, effective execution of internal control procedures, ensuring that all legal formalities have been complied with regard to prepared financial statement ,capital budgeting decisions, and assisting the CFO for presenting the financial statement to statutory auditor. Controlling the accounting and finance should be the main focus of the corporate finance.
2. Agency Problems: Who owns a corporation? Describe the process whereby the owners control the firm's management. What is the main reason that an agency relationship exists in the corporate form of organization? In this context, what kinds of problems can arise?

Common stockholders own the corporation. Common stock holders control the affairs of the corporation by electing Board of Directors in ...

#### Solution Summary

The answer contains solutions for eight questions viz., computation of liquidity ratios, fianancial ratios,leverage ratios, two distince groups reporting to Chief operating office, agency problems, international firm goal, dupont analysis, agency relationship in corporation and also the problems in agency relationship

\$2.19

## Corporate Finance : Liquidity Ratio, Collection Period, Inventory Turnover, Leverage Ratios, Du Pont Identity, Payables and Market Value

ASee attached file for full problem description.

I am needing help answering the circled questions:

1-10 and 13

1, Calculating Liquidity Ratios. SDJ, Inca, has net working capital of \$900, current liabilities of \$4,320, and inventory of \$ 1 ,900. What is the current ratio? What is the quick ratio?
2. Calculating Profitability Ratios. Bennett's Bird Cages has sales of \$41 million, total assets of \$32 million, and total debt of \$11 million. If the profit margin is 12 percent, what is net income? What is ROA? What is ROE?
3. Calculating the Average Collection Period. Pirate Lumber Yard has a current accounts receivable balance of \$308, 165. Credit sales for the year just ended were \$2, I 3 1 ,5 1 6. What is the receivables turnover? The days' sales in receivables? How long did it take on average for credit customers to pay off their accounts during the past year?
4. Calculating Inventory Turnover. Keegan Corporation has ending inventory of \$921,386, and cost of goods sold for the year just ended was \$1,843,127. What is the inventory turnover? The days' sales in inventory? How long on average did a unit of inventory sit on the shelf before it was sold?
5 Calculating Leverage Ratios. Myrtle Golf, Inc., has a total debt ratio of 45. What
is its debt-equity ratio? What is its equity multiplier?
retained earnings for the year just ended of \$300,000. The firm paid out \$220,000 in
cash dividends, and it has ending total equity of \$5 million. If Sandy's currently has
300,000 shares of common stock outstanding, what are earnings per share?
Dividends per share? What is book value per share? If the stock currently sells for
\$25 per share, what is the market-tobook ratio? The priceeearnings ratio?
7. Du Pont Identity. If Roten Rooters, Inc., has an equity multiplier of 1 .60, total asset turnover of 1.05, and a profit margin of 1.1 percent, what is its ROE?
8. Du Pont Identity. Jimmy Cricket Removal has a profit margin of 12 percent, total asset turnover of 1.35, and ROE of 17.20 percent1 What is this firm's debt-equity ratio?
9, Calculating Average Payables Period. For the past year, BDJ, Inc., had a cost of goods sold of \$18,364. At the end of the year, the accounts payable balance was \$3,105 . How long on average did it take the company to pay off its suppliers during the year? What might a large value for this ratio imply?
10. Equity Multiplier and Return on Equity. Sunny Beach Chair Company has a debt-equity ratio of .80. Return on assets is 8.4 percent, and total equity is \$430,000. What is the equity multiplier? Return on equity? Net income?
13. Sustainable Growth. Based on the following information, calculate the sustainable growth rate for Chicago Chocolate Pies:

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