assignment

Problems and Questions for Module 6

1. Samantha Knight is applying for a small- business loan. She provides the bank with the following information:

·

· cash in checking accounts, $ 5,000;

· cash in savings, $ 10,350;

· home market value, $ 145,500;

· first mortgage on house, $ 25,000;

· home equity loan limit, $ 70,000;

· home equity loan, $ 10,000;

· automobile market value, $ 19,000;

· automobile loan outstanding, $ 15,000;

· credit card debt, $ 1,500.

a) Calculate the debt- to- asset ratio.(10 points)

b) Calculate the debt- to- equity ratio. (10 points)

c) What percentage of Samantha’s assets are owned by others? (10 points)

2. Given the profit loss ( income statement) and balance sheet for Sam’s Sandwich Delivery ( Table 4– 8 see pdf in module 6 resource section), answer the following:

a) Calculate the current and quick ratios. (10 points)

b) Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio. (10 points)

c) Calculate the debt- to- equity ratio, debt- to- total- asset ratio, and operating profit margin ratio.(10 points)

d) Perform a vertical analysis of the income statement. (10 points)

e) Perform a vertical analysis of the balance sheet. (10 points)

f) Based on your analysis, would you consider investing in Sam’s Sandwich Delivery? (10 points)

3. Look up the restaurant/dining industry averages for the profit margin and compare and contrast the industry to Starbucks and McDonalds. What did you discover? (10 points)

Notes for assignments:

Please make sure you show me how you have arrived at your calculations.  For example, if you are using a formula in excel, make sure you show me the formula so that I can help you if you have done it wrong.   (so I would want you to show me that you calculated the present value like this =PV(5%,60,-1000,0,0) so that I can see where you made a mistake.  If you just give me the answer then I can’t help you see where you went wrong.