Accounting Management Homework

1. DAYS SALES OUTSTANDING Baxley Brothers has a DSO of 23 days, and its annual sales are $3,650,000. What is its accounts receivable balance? Assume that it uses a 365-day year

2. ROE AND ROIC Baker Industries’s net income is $24,000, its interest expense is $5,000, and its tax rate is 40%. Its notes payable equals $27,000, long-term debt equals $75,000, and common equity equals $250,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm’s ROE and ROIC?

3. RATIO CALCULATIONS Assume the following relationships for the Caulder Corp.: Sales/Total assets 1.33 Return on assets (ROA) 4.0% Return on equity (ROE) 8.0% Calculate Caulder’s profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital.

4. RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $200,000, a net income of $15,000, and the following balance sheet:

The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.53, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2.53), if the funds generated are used to reduce common equity (stock can be repurchased at book value), and if no other changes occur, by how much will the ROE change? What will be the firm’s new quick ratio?

5. BALANCE SHEET ANALYSIS Complete the balance sheet and sales information using the following financial data: Total assets turnover: 1.53 Days sales outstanding: 36.5 days a Inventory turnover ratio: 53 Fixed assets turnover: 3.03 Current ratio: 2.03 Gross profit margin on sales: (Sales 2 Cost of goods sold) ∕ Sales 5 25%

a Calculation is based on a 365-day year.