# Estimate the amount of external financing

Introduction to Finance

Week 5 - Numerical Exercises

S. No. Problems

1 Given the following data for Gary and Co (Millions of Dollars):

Balance Sheet Dec 31 200X

Cash $45

Accounts Payables $45

Marketable Securities 33

Notes Payables 45

Receivables 66

Other Current liabilities 21

Inventory 159

Total Current liabilities $111

Total Current Assets 303

Long term debt 24

Total liabilities $135

Net Fixed Assets 147

Common Stock 114

Total Assets $450

Retained Earnings 201

Total stockholders' equity 315

Total liabilities and equity 450

Income Statement Year 200X

Net sales $795

Cost of goods sold 660

Gross profit 135

Selling expenses 73.5

Depreciation 12

EBIT 49.5

Interest expense 4.5

EBT 45

Taxes (40% 18

Net Income 27

Calculate the following ratios:

Ratio Industry Average

Current ratio

Times interest earned

DSO

Inventory Turnover

Sales/Total Assets

Profit margin on sales

Return on Total Assets

Return on Common Equity

2 Given the compressed version of balance sheet and income statement; estimate the amount of external financing needed to increase sales by 20% next year. (use percentage of sales method)

(Dividend payout is 50%) $2,000

3 A firm has outstanding receivables of $125,000. Its credit terms are net 30. If during the past three months credit sales are $100,000, $105,000 and $60,000 how many days of sales are outstanding as receivables?

4 Given the following data develop weekly cash budget Minimum cash required is $50 and the beginning cash balance is $100.

5 Given the following data :

Days inventory = 103 days; Days receivables = 41 days and Days payables = 81 days

Calculate the cash conversion cycle and operating cycle

6 Calculate the cost of trade credit given terms of 3/20 net 60

7 A firm issues $1,000,000 of commercial paper with a maturity of 60 days and a discount rate of 5%. The paper is sold through a dealer who charges 0.25% What is the effective cost of issuing the commercial paper?

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#### Solution Preview

Introduction to Finance

Week 5 - Numerical Exercises

S. No. Problems

1 Given the following data for Gary and Co (Millions of Dollars):

Balance Sheet Dec 31 200X

Cash $45

Accounts Payables $45

Marketable Securities 33

Notes Payables 45

Receivables 66

Other Current liabilities 21

Inventory 159

Total Current liabilities $111

Total Current Assets 303

Long term debt 24

Total liabilities $135

Net Fixed Assets 147

Common Stock ...

#### Solution Summary

This discuss the steps to estimate the amount of external financing