Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected
Question:
Millay is being reviewed by several entities whose interests vary, and the companys financial ratios are a part of the data being considered. Each of the parties listed below must recommend an action based on its evaluation of Millays financial position.
Archibald MacLeish Bank. The bank is processing Millays application for a new 5-year term note. Archibald MacLeish has been Millays banker for several years but must reevaluate the companys financial position for each major transaction.
Robert Lowell Company. Lowell is a new supplier to Millay and must decide on the appropriate credit terms to extend to the company.
Robert Penn Warren. A brokerage firm specializing in the stock of electronics firms that are sold over-the-counter, Robert Penn Warren must decide if it will include Millay in a new fund being established for sale to Robert Penn Warrens clients.
Working Capital Management Committee. This is a committee of Millays management personnel chaired by the chief operating officer. The committee is charged with the responsibility of periodically reviewing the companys working capital position, comparing actual data against budgets, and recommending changes in strategy as needed.
Instructions
(a) Describe the analytical use of each of the six ratios presented on page 1535.
(b) For each of the four entities described above, identify two financial ratios, from the ratios presented on previous page that would be most valuable as a basis for its decision regarding Millay.
(c) Discuss what the financial ratios presented in the question reveal about Millay. Support your answer by citing specific ratio levels and trends as well as the interrelationships between theseratios.
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1118147290
15th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield