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business
intermediate financial management
Financial Management And Policy 12th Edition James C. Van Horne - Solutions
3. Financial statements for the Sennet Corporation follow:Sennet Corporation Balance Sheet, December 31 (in millions)20x1 20x2 20x1 20x2 Cash $ 4 $ 5 Accounts payable $ 8 $10 Accounts receivable 7 10 Notes payable 5 5 Inventory -12 -15 Accrued wages 2 3 Current assets $23 $30 Accrued taxes -3 -2
c. Prepare a source and use of working capital statement for 20x2.414 Part lV Tools of Financial Analysis and Control
b. Prepare an accounting statement of cash flows.
a. Prepare a source and use of funds statement on a cash basis for 20x2 for the Kohn Corporation.
2. Kohn Corporation comparative balance sheets at December 31 (in millions):Assets 20x1 20x2 Liabilifies and Equity Cash $ 5 $ 3 Accounts receivable 15 22 Inventories 12 15 Fixed assets, net 50 55 Other assets 8 5 - -Total assets $90 $100= -Notes payable Accounts payable Accrued wages Accrued taxes
1. Galow Fish Canning Company reports the following changes from the preceding year end. Categorize each change as either a source of funds or a use of funds.Item Change Cash Accounts receivable Inventory Gross fixed assets Depreciation Accounts payable Accruals Long-term debt Net profit Dividends
b. Suppose, now, the company has established for next year a target assets-to-sales ratio of .62, a target net profit margin of .05, and a target debt-to-equity ratio of 30. It wishes to pay an annual dividend of $.3 million and raise $1 million in equity capital next year. What is its sustainable
a. It has a target assets-to-sales ratio of .6667, a target net profit margin of.04, a target debt-to-equity ratio of .6667, and a target earnings retention rate of .75. In steady state, what is its sustainable growth rate?
3. Zippo Industries has equity capital of $12 million, total debt of $8 million, and sales last year of $30 million.
c. Prepare a pro forma balance sheet for March 31.
b. Determine the amount of additional bank borrowings necessary to maintain a cash balance of $50,000 at all times.
a. Prepare a cash budget for the months of January, February, and March.
Purchases of raw materials to produce malt are made in the month prior to the sale and amount to 60 percent of sales in the subsequent month. Payments for these purchases occur in the month after the purchase. Labor costs, including overtime, are expected to be $150,000 in January, $200,000 in
2. Consider the balance sheet of Rodriguez Malting Company at December 31 (in thousands). The company has received a large order and anticipates the need to go to its bank to increase its borrowings. As a result, it has to forecast its cash requirements for January, February, and March. Typically,
c. Evaluate your findings.Assets Cash and cash equivalents $ 140,000 $ 31,000 Accounts receivable 346,000 528,000 Inventories 432,000 683,000 Current assets $ 918,000 $1,242,000 Net fixed assets 1,113,000 1,398,000 Total $2,031,000 -$2,640,000 Liabilities and equity Accounts payable $ 413,000 $
b. Prepare an accounting statement of cash flows.
a. Prepare a source and use of funds statement on a cash basis.
1. Serap-Jones, Inc., had the following financial statements for 20x1 and 20x2.
15. Wholesaling of electronic and computer products
14. Tools and process/environmental controls manufacturing
13. Pharmaceutical manufacturing
12. News and information publishing
11. Laundry detergents and other consumer products
10. Integrated oil production
4. The common size analysis shows that receivables are growing faster than total assets and current assets, while cash declined dramatically as a percentage of both. Net fixed assets surged in 20x2, but then fell back as a percentage of the total to almost the 20x1 percentage. The absolute amounts
3.a. Total assets = Sales/turnover = $6 million/6 = $1 million Earning power = Net profits/total assets= $120,000/$1 million = 12%b. Total assets = $1 million X 1.2 = $1.2 million Earning power = Turnover X Net profit margin- $6 million X 3% = 15%$1.2 million
The buildup in inventories and receivables has resulted in a decline in the asset turnover ratio, and this, coupled with the decline in profitability, has resulted in a sharp decrease in the return on assets ratio.Long-term debt Long-term debt 2. = 5-- Long-term debt = $100,000 Net worth 200,000
The current and acid-test ratios have fluctuated, but the current ratio is not particularly inspiring. The lack of deterioration in these ratios is clouded by the relative buildup in both receivables and inventories, evidencing a deterioration in the liquidity of these two assets. Both the gross
The company's profitability has declined steadily over the period. As only$50,000 is added to retained earnings, the company must be paying substantial dividends. Receivables are growing slower, although the average collection period is still very reasonable relative to the terms given. Inventory
Using Altman's model for predicting bankruptcy presented in this chapter, determine the Z-score index for each company. On the basis of these indexes, is either company likely to go into bankruptcy? Why?380 Part IV Tools of Financial A n a l y s i s and Control FA@ ki Solutions to Self- correction
10. Two companies have the following financial characteristics (in thousands):Working capital Total assets Total liabilities Equity value (market)Retained earnings Sales Earnings before interest and taxes- - -~-Zoom Company Zing Company$10,500 -$ 1,600 50,000 21,000 22,000 13,000 38,000 5,100
9. Tic Tac Homes has had the following balance sheet statements during the past 4 years (in thousands):Cash $ 214 $ 93 $ 42 5 38 Receivables 1,213 1,569 1,846 2,562 Inventories 2,102 2,893 3,678 4,261 Net fixed asset 2,219 2346 2,388 2,692 Total assets $5,748 $6,901 $7,954 $9,553 = = =-Accounts
d. From this information, what can you say about the expected growth of the company?Chapter 12 Financial Ratio Analysis 379
c. What is the ratio of market-to-book value per share?
b. What is the dividend yield?
a. What is the price/eamings ratio?
8. Susan Doherty Designs has 1.64 million shares outstanding, shareholders' equity of $36.4 million, earnings of $4.7 million during the last 12 months during which it paid dividends of $1.1 million, and a share price of $59.
7. The following information is available on the Vanier Corporation. Assuming sales and production are steady throughout the year and a 360-day year, complete the balance sheet and income statement for Vanier Corporation.378 Part IV Tools of Financial A n a l y s i s a n d C o n t r o l Balance
(3) There are 100,000 shares outstanding, and the stock is selling for$80 a share. The company offers you an opportunity to buy 50,000 additional shares at this price.
(2) U.S. Republic wants you, a large insurance company, to pay off its note at the bank and assume it on a 10-year maturity basis at the current coupon of 14 percent.
(1) U.S. Republic wants to buy $500,000 worth of raw materials from you, with payment to be due in 90 days.
c. Indicate which ratios would be of most interest to you and what your decision would be in each of the following situations:
b. Evaluate the position of the company from the table. Cite specific ratio levels and trends as evidence.
12. Cash flow to long-term debt
11. Overall interest coverage
10. Tangible asset turnover
9. Return on tangible assets
8. Rate of return on equity
7. Net profit margin
6. Gross profit margin
5. Long-term debt to capitalization
4. Inventory turnover
3. Receivables turnover
2. Acid-test ratio
1. Current ratio
6.U.S. Republic Corporation Balance Sheet, December 31,20x3 Assets Liabilities and Stockholders' Equity Cash Accounts receivable Inventory*Fixed assets, net Excess over book value of assets acquired(intangible assets)Total assets$ 500,000 Notes payable 2,500,000 Accounts payable 3,500,000 Accrued
b. Using the cumulative deduction method, determine the coverage for each issue.376 Part IV Tools of Financial A n a l y s i s a n d C o n t r o l
a. If the average earnings before interest and taxes of the Diters Corporation are $1.5 million, what is the overall interest coverage?
5. The long-term debt section of the balance sheet of the Diters Corporation appears as follows:9:% mortgage bonds $2,500,000 12$ second-mortgage bonds 1,500,000 lot% debentures 1,000,000 141% subordinated debentures 1,000,000$6,000,000
Determine the asset turnover, net profit margin, and earning power for each of the companies.
4. The data for various companies in the same industry and of about the same size follow (in millions):Company Sales 510 $20 $8 $5 $12 $17 Total assets 8 10 6 2.5 4 8 Net income 0.7 2.0 0.8 0.5 1.5 1.0
b. How rapidly (in how many days) must accounts receivable be collected if management wants to have only an average of $50,000 invested in receivables? (Assume a 360-day year.)
a. How much average inventory should be carried if management wants the inventory turnover to be 4? (Assume a 360-day year for calculations.)
3. A company has total annual sales (all credit) of $400,000 and a gross profit margin of 20 percent. Its current assets are $80,000; current Liabilities, $60,000;inventories, $30,000; and cash, $10,000.
(3) Accounts payable of $50,000 are paid off with cash.Chapter 12 Financial Ratio A n a l y s i s 375(4) Accounts receivable of $75,000 are collected.(5) Long-term debt of $200,000 is raised for investment in inventories($100,000) and to pay down short-term borrowings ($100,000).
(2) Inventories of $120,000 are purchased and financed with trade credit.
(1) A machine costing $100,000 is paid for with cash.
b. What would be its current ratio if each of the following occurred, holding all other things constant?
a. What is the company's current ratio?
2. Parker Phial Company has current assets of $1 million and current liabilities of $600,000.
Could you use the marketing research process to analyse your career opportunities and job possibilities? (Think of yourself as a ‘product’ and employers as potential ‘customers’.)What would your research plan look like? pg95
What specific kinds of research can VisitScotland use to learn more about its customers’preferences and buying behaviours? Sketch out a brief research plan for VisitScotland’s next project pg95.‑
discuss the special issues some marketing researchers face, including public policy and ethics issues pg95‑
explain the importance of information to the company and its understanding of the marketplace pg95‑
Is the marketing environment uncontrollable – something that the company can only prepare for and react to? Or can companies be proactive in changing environmental factors?Think of a good example that makes your point, then read on. pg95‑
How are major demographic forces linked with economic changes? With major cultural trends? How are the natural and technological environments linked? Think of an example of a company that has recognised one of these links and turned it into a marketing opportunity. pg95‑
identify the major trends in the firm’s natural and technological environments pg95‑ explain the key changes in the political and cultural environments pg95‑ discuss how companies can react to the marketing environment pg95‑
explain how changes in the demographic and economic environments affect marketing decisions pg95‑
describe the environmental forces that affect the company’s ability to serve its customers pg95‑
list the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing return on marketing pg95‑
describe the elements of a customer-driven marketing strategy and mix, and the forces that influence them pg95‑
explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value pg95‑
discuss how to design business portfolios and develop growth strategies pg95‑
explain company-wide strategic planning and its four steps pg95‑
Think of a company for which you are a ‘true friend’. What strategy does this company use to manage its relationship with you? pg95‑
How well does Ford manage its relationships with customers? What CRM strategy does it use? Compare the relationship management strategies of Tesco and Asda. pg95‑
14-13 Determine the advertising-to-sales ratios for two competing companies and compare them to the industry advertising-to-sales ratio found above. Why do you think there is a difference between competitors and the industry average? (AACSB: Communication; Use of IT;Analytical reasoning; Reflective
14-12 Find industry advertising-to-sales ratio data. Why do some industries have higher advertising-to-sales ratios than others? (AACSB: Communication; Use of IT; Reflective thinking) pg95
14-11 Find other examples of marketers creating controversy by promoting culture-based products that could be viewed as inappropriate by others outside of that culture. (AACSB: Communication; Reflective thinking) pg95 Marketing by the numbers:advertising-to-sales ratios Using the
14-10 Since lighter skin and skin whitening are popular in Thailand, is it wrong for marketers to offer and promote products that encourage this belief and behaviour? Explain why or why not. (AACSB: Communication;Reflective thinking; Ethical reasoning) pg95
A Unilever brand in Thailand ran into some problems with one of its promotion campaigns, the ‘Citra 3D brightening girls search’. Citra Pearly White UV Body Lotion is marketed as a skin-whitening product. Skin whitening is popular in many Asian countries because lighter skin colour is
14-9 Debate whether or not current regulations and guidelines regarding online advertising are adequate for this 428 pg95 PART 3 DESIGNING A CUSTOMER VALUE-DRIVEN STRATEGY AND MIX type of promotion. Is it likely that the regulators will issue new guidelines or regulations? (AACSB:
14-8 Find examples of native advertising on various publishers’websites. Create a presentation with screen shots showing the content and how it is identified. Has the content been shared with others via social media?(AACSB: Communication; Use of IT) pg95
Marketers have always advertised in traditional media such as newspapers, television and magazines, but today they are increasingly creating content for the online platforms of these media through native advertising , also called sponsored content.This form of promotion is not new. It dates back to
14-7 Find three examples of advertisements that incorporate socially responsible marketing in the message. Some companies are criticised for exploiting social issues or organisations by promoting them for their own gain. Do the examples you found do that? Explain. (AACSB: Communication;Ethical
14-6 Marketers use Q Scores to determine a celebrity’s appeal to his or her target audience. Research Q Scores and write a report of a celebrity’s Q Score for the past several years. If the score changed considerably, what could be the reason? What other types of Q Scores are there besides
14- 4 Name and describe the two basic promotion mix strategies.In which strategy is advertising more important?(AACSB: Communication; Reflective thinking) pg95
14-3 Name and briefly describe the nine elements of the communications process. Why do marketers need to understand these elements? (AACSB: Communication;Reflective thinking) pg95
14-2 Why is there a need for integrated marketing communications and how do marketers go about implementing it? (AACSB: Communication; Reflective thinking) pg95
Socially responsible marketing communication(pp. 424–425) pg95
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