CASE 2: IMPERIAL ELECTRONICS LTD. Imperial Electronics Ltd. is a publicly owned company with 100,000 common shares outstanding. At the last executive committee meeting, Sandra Redgrave, CEO of the company, informed the board members of the economic slowdown that she anticipated during the next several years. She also told them that several U.S. firms were consid- ering becoming more aggressive in the industry, particularly in the Canadian market. a. Because of these external threats, management of Imperial Electronics Lt pates difficult times ahead. Company management is now watching its financiato calculate and comment on Imperial Electronics Ltd.'s December 31, 2012, financial On the basis of the information contained in the company's financial state, ratios by comparing them with the industry average. The common shares are value closely to keep the firm under control. on the stock market at $120. current ratio b. quick ratio c. debt-to-total-assets ratio d. debt-to-equity ratio e. times-interest-earned ratio f. fixed-charges coverage ratio g. average collection period h. inventory turnover ratio i. capital assets turnover ratio j. total assets turnover ratio k profit margin on revenue ratio 1. return on revenue ratio m. return on total assets ratio return on equity ratio o. earnings per share p. price/earnings ratio n. In July 2013, management of Imperial Electronics Ltd. is planning to invest $3,000,000 to modernize its capital assets and expand. The management committee is considering borrowing funds from external sources. However, before meeting the investors, the committee wants to examine the amount that could be generated inter- nally before June 30, 2013. Industry financial ratios are as follows: a. current ratio 1.95 times b. quick ratio 1.03 times c. debt-to-total-assets ratio 55% d. debt-to-equity ratio 1.21 times e.times-interest-earned ratio 6.43 times f. fixed-charges coverage ratio 4.51 times g. average collection period h. inventory turnover ratio i. capital assets turnover ratio j. total assets turnover ratio 2.90 times k. profit margin on revenue ratio 9.10% 1. return on revenue ratio 35.00 days 7.00 times 5.10 times 2.10% in. n. o. return on total assets ratio 6.00% return on equity ratio 21.00% earnings per share $8.50 p. price/earnings ratio 10.30 times Assuming that the company is just as efficient as the industry in managing its inventories and trade receivables, calculate the amount of cash it would generate by June 30, 2013. Also, assume that in 2013 revenue will increase by 9%, return on rev- enue will be 5%, depreciation will increase to $400,000, and cost of sales in relation to revenue will improve to 72%. Statement of Income For the year ended December 31, 2012 (in %) 30,000,000 (23,000,000) 7,000,000 Revenue Cost of sales Gross profit Expenses: Distribution costs Lease Depreciation Administrative expenses Total expenses Finance costs Total Profit before taxes Income tax expense Profit for the year (2,500,000) (125,000) (300,000) (1,700,000) (4.625,000) (400.000) (5.025,000) 1,975.000 (900,000) 1,075,000