Question 2 (35 points)

You are provided partial information about a firms financial statements and financial ratios below. Also, choose an accounts payables level between $500,000 and $2,000,000. Firm does not have any other current liabilities and does not pay any interest on accounts payables. Assume that firms long-term debt is perpetual at %10 interest rate.

Solve the following questions: a)Prepare the balance sheet and income statement with as much detail as possible. b) What is firms operating cash flow? c) Calculate firms ROA and ROE.

Asset turnover ratio = 2 Inventory turnover ratio= 4 Current ratio= 1.5 Quick (Acid-test) ratio=1 Cash ratio=0.2 Debt/Equity Ratio=0.5 Long-term Debt= $500,000 Interest rate on debt=10% Depreciation=$350,000 General and administrative expenses=$800,000 Tax rate=50%