FI311 MSU Paying Off Suppliers & Short Term Creditors Question

User Generated

Yrrrcw

Business Finance

FI311

Michigan State University

Description

due 3 hours later

not hard question

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Homework #1 1. Suppose a firm want to pay off some of its suppliers and short-term creditors. What will happen to the current ratio? Suppose a firm use cash to buy some inventory. What will happen in this case? 2. A company has a profit margin of 4%, asset turnover of 2.0, and a debt-to-asset ratio of 60%. What is the ROE? 3. Check out the newest annual report of Apple and use the information provided in financial statements to calculate the current year ratios which are listed below. Current ratio, quick ratio, inventory turnover, total asset turnover, profit margin, ROA, ROE, PE ratio (use stock price of July 10th), EBITDA margin (D&A is in cash flow statement). 4. During the past year, R&J, Inc. had net income of $100,000, paid dividends pf $50,000 to its preferred stockholders, and paid $30,000 in dividends to its common shareholders. R&J’s common stock account showed the following: January 1 Shares issued and outstanding at the beginning of the year 10,000 April 1 Shares issued 4,000 July 1 10% stock dividend September 1 Shares repurchased for the treasury 3,000 Compute the weighted average number of common shares outstanding during the year and compute basic EPS. Question #1 and #2 worth 30 point of each, question #3 worth 40 point. Question #4 is not easy and you will get 50 extra credit if you can solve it correctly! Please submit your homework on Thursday’s class
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Explanation & Answer

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Running head: FINANCE HOMEWORK

1

Finance homework
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FINANCE HOMEWORK

Solution
Paying off suppliers and short-term creditors will reduce the accounts payable and shortterm. This will increase the current ratio. If the firm uses cash to purchase inventory, there will
be no change in the current ratio since the current assets will remain the same.

Solution
ROE ...


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