Basic liquidity ratios. You are been asked by the Chief Financial Officer of Kwing Corporation to...

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Basic liquidity ratios. You are been asked by the Chief Financial Officer of Kwing Corporation to analyze its liquidity position in 2012. You have gathered the following data from the records of the company and industry published reports (in thousands): Kwing Corp. P 3,500 8,000 6,500 14,000 20,000 200,000 130,000 140,000 Average cash Average trade receivables Average inventory Average trade payables Net cash sales Net credit sales Cost of sales Net credit purchases The company uses a 360-day a year base. The credit terms offered to customers are 2/10, n/40. Suppliers give credit terms of 3/20. n/40. Required: For Kwing Corporation and the industry, compute the following: a. Receivable turnover b. Collection period c. Inventory turnover d. Inventory days (Days to sell inventory) Payable turnover Payment period 9. Operating cycle h. Net cash cycle Net working capital j. Working capital turnover k Current ratio I 2 Industry Average P 2,000 10,000 7,000 12,000 25,000 150,000 112,000 96,000 Acid-test (quick-assets) ratio 12. Effects of leverage to return on ordinary equity. You are in the process of organizing a new company to produce and sell a lady beauty product. You feel that P5 million would be enough to finance the new company's operations. You are considering following financing mix in raising the needed money for investment Straight ordinary equity Shareholders' equity mix: Leverage and equity mix: All the P5 million would be raised by issuance of ordinary shares. P3.5 million would be raised from ordinary shares issuances and P1.5 million from the sale of P100 pr. 10%, preference share. P3.0 million would be obtained from ordinary shares issuances and P2.0 million from issuance of a 12% bonds payable. You estimated that the operations would generate an earning of P2 million each year before interest and taxes. The tax rate is 40% Required: Determine the best financing mix that would maximize return on ordinary equity. Basic liquidity ratios. You are been asked by the Chief Financial Officer of Kwing Corporation to analyze its liquidity position in 2012. You have gathered the following data from the records of the company and industry published reports (in thousands): Kwing Corp. P 3,500 8,000 6,500 14,000 20,000 200,000 130,000 140,000 Average cash Average trade receivables Average inventory Average trade payables Net cash sales Net credit sales Cost of sales Net credit purchases The company uses a 360-day a year base. The credit terms offered to customers are 2/10, n/40. Suppliers give credit terms of 3/20. n/40. Required: For Kwing Corporation and the industry, compute the following: a. Receivable turnover b. Collection period c. Inventory turnover d. Inventory days (Days to sell inventory) Payable turnover Payment period 9. Operating cycle h. Net cash cycle Net working capital j. Working capital turnover k Current ratio I 2 Industry Average P 2,000 10,000 7,000 12,000 25,000 150,000 112,000 96,000 Acid-test (quick-assets) ratio 12. Effects of leverage to return on ordinary equity. You are in the process of organizing a new company to produce and sell a lady beauty product. You feel that P5 million would be enough to finance the new company's operations. You are considering following financing mix in raising the needed money for investment Straight ordinary equity Shareholders' equity mix: Leverage and equity mix: All the P5 million would be raised by issuance of ordinary shares. P3.5 million would be raised from ordinary shares issuances and P1.5 million from the sale of P100 pr. 10%, preference share. P3.0 million would be obtained from ordinary shares issuances and P2.0 million from issuance of a 12% bonds payable. You estimated that the operations would generate an earning of P2 million each year before interest and taxes. The tax rate is 40% Required: Determine the best financing mix that would maximize return on ordinary equity.

Answer rating: 100% (QA)

Option 1 Straight Ordinary Equity All equity Earnings before Interest and Taxes EBIT P2000000 Tax Rate T 40 Net Income NI EBIT 1 T P2000000 1 040 P120... View the full answer