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    Corporate Finance : Liquidity Ratios, Profitability, Collection Period, Inventory Turnover, Leverage and Sustainable Growth

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    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?

    13. Sustainable Growth. Based on the following information, calculate the sustainable growth rate for Chicago Chocolate Pies:

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    Solution Preview

    1. NWC = 900
    Current Liability = 4320
    Current asset = Current Liability +NWC = 900+ 4320 = 5220
    Then Current Ratio = Current asset / Current Liability = 5220/4320 = 1.21
    Quick ratio = (Current asset - inventory ) / Current Liability = (5220 - 1900) /4320 = 0.77

    2. Sales = 41
    Asset = 32
    Debt = 11
    Profit margin = 12%

    Net income = sales * Profit margin = ...

    Solution Summary

    Liquidity Ratios, Profitability, Collection Period, Inventory Turnover, Leverage and Sustainable Growth are investigated. The solution is detailed and well presented.