ONLY ANSWER WRONG ANSWERS

Module 11 Homework #1 Navigation

Question1Question2Question3This page

Return to courseFinish attempt ...

eBook

Print

Question 3

Partially correct

Mark 2.82 out of 3.33

Flag question

Question text

Refine Cash Balance and Consider Capital Structure Consider the following actual FY2019 data and a forecast of FY2020 selected balance sheet and income statement numbers.

$ millions	FY2019 Actual	FY2020 Est.
Net sales	$29,009	$32,102
Total assets	14,592	16,051
Total liabilities	8,755	9,923
Total equity	5,837	6,128
Cash	2,918	4,378
Marketable securities	730	730
Treasury stock	(2,189)	(2,627)

ONLY ANSWER WRONG ANSWERS

a. Calculate the company's normal cash level as a percentage of sales. Round answer to one decimal place (ex: 0.2345 = 23.5%

10.01% right answer

ONLY ANSWER WRONG ANSWERS b. Determine the amount of adjustment needed to return cash to a normal level. Is an adjustment warranted? If an adjustment is not warranted, enter zero as the amount needed to return cash to a normal level. If the adjustment is a decrease, use a negative sign with your answer. Round answer to the nearest whole number, if applicable. $-1,136 right answer

ONLY ANSWER WRONG ANSWERS

ONLY ANSWER WRONG ANSWERS

ONLY ANSWER WRONG ANSWERS c. Compute the liabilities-to-equity ratio for both years. Round answers to two decimal places.

FY2019 Actual	1.5 right answer
FY2020 Est.	1.62 right answer

d. Adjust marketable securities so the forecasted cash balance is at its normal level. What affect does this have on the forecasted liabilities-to-equity ratio?

e. Adjust long-term debt so the forecasted cash balance is at its normal level. What effect does this have on the forecasted liabilities-to-equity ratio?

f. Adjust treasury stock so the forecasted cash balance is at its normal level. What effect does this have on the forecasted liabilities-to-equity ratio?

g. Adjust both long-term debt and marketable securities so as to adjust the forecasted cash balance. In so doing, make sure we preserve the companys liabilities-to-equity ratio. (Hint: Use Goal Seek under the What-If Analysis in Excel to determine the proportion of long-term debt versus treasury stock needed to ensure the forecasted liabilities-to-equity ratio remains at its historical level.)

h. Adjust both long-term debt and treasury stock so as to adjust the forecasted cash balance. In so doing, make sure we preserve the companys liabilities-to-equity ratio. (Hint: Use Goal Seek under the What-If Analysis in Excel to determine the proportion of long-term debt versus treasury stock needed to ensure the forecasted liabilities-to-equity ratio remains at its historical level.

For parts d through h, complete the table below.

Do not use any negative signs with your answers.

Round liabilities to equity ratios to two decimal places.

	d.			g. Debt and	h. Debt and
	Marketable		f. Treasury	Marketable	Treasury
$ millions	Securities	e. Debt	Stock	securities	stock
Total assets	16,051 Right answer	14,915 Right answer	14,915 Right answer	15347 WRONG ANSWER	14,915 Right answer
Total liabilities	9,923 Right answer	8,787 Right answer	9,923 Right answer	9219 WRONG ANSWER	8957 WRONG ANSWER
Total equity	6,128 Right answer	6,128 Right answer	4,992 Right answer	6,128 Right answer	5958 WRONG ANSWER
Cash	3,242 Right answer	3,242 Right answer	3,242 Right answer	3,242 Right answer	3,242 Right answer
Marketable securities	1,866 Right answer	730 Right answer	730 Right answer	1162 WRONG ANSWER	2796 WRONG ANSWER
Treasury stock	2,627 Right answer	2,627 Right answer	3,763 Right answer	2,627 Right answer	730 Right answer
Liabilities to equity ratio	1.62 Right answer	1.43 Right answer	1.99 Right answer	1.5 Right answer	1.5 Right answer