Dupont, Liquidity Ratios, Financial Ratios, Leverage Ratios
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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
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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
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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 ...
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