Seminar: Corporate Finance REI, English section, Year of Study: II

SEMINAR NO 6 Financial Ratios

1. The Following data is known for Kaiser & CoCash100.00Fixed Assets283.5Total Operating Revenues 1000.00Net Income50.00Quick Ratio2.0Current Ratio3.0Average collection period40 daysROE12%a) Determine the following:I. Accounts receivableII. Current LiabilitiesIII. Current AssetsIV. Total AssetsV. ROAVI. EquityVII. Long term debtb) If Kaiser could reduce its average collection period from 40 to 30 days, keeping all other thing equal how much cash will this generate?

2. We know the following information for Berry corporation:Total Asset Turnover:1.5ROA:3%ROE: 5%Determine the profit margin and the debt ratio for Berry.

3. The following information is for Cordell Computer Corporation:Balance Sheet (average values: (2011+2012)/2)Cash77500Accounts payable129000

Accounts Receivable336000Notes Payable84000

Inventories241500Other current assets117000

Total Current Assets655000Total Current Liabilities330000

Fixed Assets (net)292500Long-Term Debt256500

Equity361000

Total Assets947500Total Equity&Liabilities947500

Income Statement (2012)Total Operating Sales1607500

Cost of Goods Sold

- Raw materials(717000)

- Salaries(453000)

- Electricity & water(68000)

- Overhead(113000)

- Depreciation(41500)

Selling Expenses(115000)

General Administrative Expenses(30000)

EBIT70000

Interests(24500)

EBT45500

Income tax(18200)

Net Income27300

Financial Ratios

Financial RatioCordellIndustry Average

Current Ratio2.0

Average collection period35.0 days

Inventory Turnover6.7

Total Assets Turnover3.0

Profit Margin1.2%

ROA3.6%

ROE9.0%

a. Determine the financial ratiosb. Build Du-Pont Equation for Cordell and the Industryc. Which are the strengths and the weaknesses of Cordell

4. Complete the following balance sheet and the information required from the Income Statement using the following data:-debt ratio: 50%- quick ratio: 0.8- total assets turnover: 1.5- Average collection period: 36 days- profit margin: 25%- Inventories turnover: 5

CashAccounts payable

Accounts ReceivableLong-Term Debt60000

InventoriesEquity

Fixed Assets (net)Retained Earnings97500

Total Assets300000Total Equity&Liabilities

Total operating revenuesCost of Goods Sold