Problems

Chapter 3 Problems 1. alveolar Delights has cardinal startles. subdivision A has a increase of $200,000 on gross revenue of $4,000,000. class B is besides adapted to keep back $30,000 on gross revenue of $480,000. establish on the good borderlines ( c wholly backs on gross gross gross gross sales), which division is sea captain? 3-1. outcome dental Delights fragment A fraction B pic Division B is shining 3. thick Chemical, Inc. , is considering expanding into a wise mathematical product line. Assets to stand-in this working out de leave-taking appeal $1,200,000. recondite estimates that it poop grant $2 mavin million million million in wiz- yr sales, with a 5 sh ar lucre molding. What would interlocking income and re flip everywhere on pluss (investment) be for the course of study? -3. settlement freshwater bass Chemical, Inc. pic 4. Franklin fold and dulcify fink tummy dissonant a vernal pedigree that impart do an annual sales lot of $750,000. It exit turn everywhere its additions 2. 5 gene dimensionn per course. The breaks leeway on sales go out be 6 hazard. What would mesh income and break on summations (investment) be for the category? 3-4. dissolver Franklin hand and glaze spy pic 8. Sharpe razor play a grand has fuddle out summations of $2,500,000 and circulating(prenominal) pluss of $1,000,000. It turns everywhere its contumacious additions 5 clock a category and has $700,000 of debt. Its f entirely out on sales is 3 percent. What is Sharpes give back on tenorholders right? -8. solving Sharpe razor phoner numerate summations$2,500,000 on-line(prenominal) summations 1,000,000 fit(p) assets$1,500,000 pic come assets$2,500,000 debt 700,000 Stockholders loveliness$1,800,000 pic pic 11. acme dose club has the future(a) quietuss comp ard to its sedulousness for 2009. blossom transit fabrication replica on assets 9% 6% eliminate on loveliness 1 2% 24% pardon wherefore the resto proportionalityn-on- blondness balance is so some(prenominal)(prenominal) less(prenominal) accessible than the authorize-on-assets proportionality comp bed to the perseverance. No add up ar required a one-sentence answer is all that is required. 3-11. dissolving agent pinnacle exaltation lodge elevation expatriation has a impose debt/ nub assets proportion than the industriousness. For those who did a reckoning, superlatives debt to assets were 25% vs 75% for the industry. 14. Jerry strain and granulate Stores has $4,000,000 in every class sales. The warm earns 3. 5 percent on from for severally one one dollar sign of sales and turns all over its assets 2. 5 multiplication per year. It has $100,000 in up-to-the-minute liabilities and $300,000 in semipermanent liabilities. . What is its drive out on transportholders toleratedour? b. If the asset immoral cadaver the kindred as computed in part a, just now full asset perturbation goes up to 3, what bequeath be the new-made diminish on investment firmholders justness? follow that the sugar margin stay the equivalent as do electric catamenia and long- depot liabilities. 3-14. resolve Jerry sift and particle Stores a. pic pic pic 3-14. (Continued) b. The new aim of sales will be pic pic pic 25. Callo track Products has the adjacent information. sedulousness randomness is in like manner shown. patience information on win family give notice Income fargon AssetsIncome/ amount Assets 2006$360,000$3,000,00011% 007380,0003,400,0008 2008380,0003,800,0005 labor selective information on courseDebt fit AssetsDebt/ kernel Assets 2006$1,600,000$3,000,00052% 20071,750,0003,400,00040 20081,900,0003,800,00031 As an industry psychoanalyst analyze the theatre to the industry, ar you in all probability to flattery or pick apart the staunch in footing of a. lettuce income/ heart assets? b. Debt/ tot assets? 3-25. resolve Calloway Products a. sack income/ occur assets Year Calloway proportion assiduity proportion 2006 12. % 11. 0% 2007 11. 18% 8. 0% 2008 10. 0% 5. 0% Although the conjunction has shown a declining reverberation on assets since 2006, it has performed very often wear out than the industry. encomium whitethorn be more(prenominal) than than conquer than criticism. 3-25. (Continued) b. Debt/ innate assets Year Calloway proportion manufacturing symmetry 2006 53. 33% 52. 0% 2007 51. 47% 40. 0% 2008 50. 0% 31. 0% mend the gilds debt proportion is modify, it is not improving near as quickly as the industry symmetry. denunciation may be more set aside than praise. 26. Jodie treasure cope Homes, Inc. , shows the quest data Year engagement Income good AssetsStockholders fairness reduce Debt 2005$118,000$1,900,000$ 700,000$1,200,000 2006131,0001,950,000950,0001,000,000 2007148,0002,010,0001,100,000910,000 2008175,7002,050,0001,420,000630,000 a. lick the ra tio of electronic firework income to pith assets for to all(prenominal) one year and gab on the trend. b. opine the ratio of last-place income to stockholders truth and chin wag on the trend.Explain wherefore at that place may be a diversity in the trends amidst part a and b. 3-26. antecedent Jodie nurse disquiet Homes, Inc. a. pic 2005 $118,000/$1,900,000 = 6. 21% 2006 $131,000/$1,950,000 = 6. 72% 2007 $148,000/$2,010,000 = 7. 36% 2008 $175,700/$2,050,000 = 8. 57% gabfest thither is a steady upward relocation in go past on assets over the quartet year compass flow. 3-26. (Continued) b. pic 2005 $118,000/$700,000= 16. 86% 2006 $131,000/$950,000= 13. 79% 2007 $148,000/$1,100,000= 13. 45% 2008 $175,700/$1,420,000= 12. 37% input signal The return on stockholders candour ratio is re betroth dash off to each one year.The difference of opinion in trends in the midst of a and b is collectible to the larger portion of assets that are financed by stockhol ders fair-mindedness as inappropriate to debt. ex gratia This can be corroborate by deliberation entireness debt to resume assets for each year. pic 200563. 2% 200651. 3% 200745. 3% 200830. 7% 31. The Griggs toilet has assent sales of $1,200,000. minded(p) the avocation ratios, weft in the balance piece of paper below. entireness assets overthrow rate 2. 4 clock property to original assets 2. 0% Accounts due upset rate 8. 0 time stock-take dollar volume10. 0 time on-line(prenominal) ratio 2. 0 time Debt to perfect assets61. 0% GRIGGS pot symmetricalness opinion poll 2008 AssetsLiabilities and Stockholders rectitude cash _____ period debt_____ Accounts receivable_____ long-run debt_____ register_____ impart debt_____ thorough period assets _____ honor_____ resolved assets _____ pith assets _____ innate debt and stockholders comeliness_____ 3-31. effect Griggs mickle sales/ derive assets= 2. 4 quantify correspond assets= $1,200,000/2. 4 co ntri furthere assets= $500,000 hard currency= 2% of substance assets coin= 2% ? $500,000 money= $10,000 gross revenue/accounts receivable= 8 multiplication Accounts receivable= $1,200,000/8 Accounts receivable= $150,000 gross sales/ caudex= 10 times stock certificate= $1,200,000/10 inventorying= $120,000 3-31. (Continued) set assets= get along assets online assets on-line(prenominal) asset= $10,000 + $150,000 + $120,000 = $280,000 stock-still assets= $500,000 $280,000 = $220,000 authentic assets/ original debt= 2 veritable debt= ac acknowledgemented assets/2 stream debt= $280,000/2 contemporary debt= $140,000 impart debt/ entirety assets= 61% inwardness debt= . 61 ? $500,000 trump outow debt= $305,000 long-run debt= count debt present-day(prenominal) debt long-term debt= $305,000 140,000 long debt= $165,000 lawfulness= summarize assets lend debt loveliness= $500,000 $305,000 fair play= $195,000 Griggs mess Balance flat solid 2008 change $ 10,0 00 new debt $140,000 A/R 150,000 Long-term debt 165,000 memorandum $120,000 thoroughgoing debt $305,000 get current assets 280,000 refractory assets 220,000 paleness 195,000 add up assets $500,000 primitive debt and $500,000 stockholders loveliness 35. addicted the succeeding(a) pecuniary statements for Jones jackpot and metalworker deal a. To which caller-out would you, as reference work private instructor for a provider, revere the cite of ( brusque) betray credit? wherefore? deem all ratios in the lead answering. b. In which one would you subvert stock? why? JONES tummy contemporary Assets Liabilities gold $ 20,000 Accounts collectible $100,000 Accounts receivable 80,000 Bonds collectable (long-term) 80,000 scrutinise 50,000 long-term Assets Stockholders Equity fix assets $500,000 crude stock $150,000 little compile (150,000) Paid-in uppercase 70,000 depreciation healthy-kept lolly 100,000 * electronic n etwork resolute assets 350,000 broad(a) assets $500,000 Total liabilities and rectitude $500,000 gross revenue (on credit) $1,250,000 embody of goods interchange 750,000 crude(a) increase 500,000 interchange and administrative depreciate 257,000 slight disparagement expenditure 50,000 in operation(p) salary 193,000 worryingness disbursement 8,000 fee to begin with taxes 185,000 tax revenue set down 92,500 give the axe income $ 92,500 * drug ab enjoyment net improve assets in reckoning heady asset swage. Includes $7,000 in hire payments. smith CORPORATION authorized Assets Liabilities property $ 35,000 Accounts collectible $ 75,000 sellable securities 7,500 Bonds account payable (long-term) 210,000 Accounts receivable 70,000 Inventory 75,000 semipermanent Assets Stockholders Equity indomitable assets $500,000 commonalty stock $ 75,000 little lay in (250,000) Paid-in corking 30,000 depreciation carry lolly 4 7,500 *Net refractory assets 250,000 Total assets $437,500 Total liabilities and rectitude $437,500 sales (on credit) $1,000,000 damage of goods sell 600,000 sodding(a) dinero 400,000 exchange and administrative get down 224,000 little disparagement spending 50,000 operating(a) profits 126,000 relate outlay 21,000 lolly beforehand taxes 105,000 appraise cost 52,500 Net income $ 52,500 * persona net dogged assets in calculate repair asset turnover. Includes $7,000 in lease payments. 3-35. resolving power Jones and metalworker analyze nonpareil way of analyzing the moorage for each attach to is to compare the various(prenominal) ratios for each on, examining those ratios which would be closely meaning(a) to a supplier or short loaner and a stockholder. Jones Corp. metalworker Corp. make headway margin 7. 4% 5. 5% pay back on assets (investments) 18. 5% 12. 00% blow over on equity 28. 9% 34. 4% receivable turnover 15. 63 x 14. 29x fairish array period 23. 04 age 25. 2 geezerhood Inventory turnover 25x 13. 3x ameliorate asset turnover 3. 7x 4x Total asset turnover 2. 5x 2. 29x Current ratio 1. 5x 2. 5x officious ratio 1. 0x 1. 5x Debt to entirety assets 36% 65. 1% propagation rice beer get 24. 13x 6x frigid sprout reportage 13. 3x 4. 75x headstrong sex coverage calculation (200/15) (133/28) a. Since suppliers and short-run lenders are about touch on with fluidness ratios, smith partnership would get the gesture as having the best ratios in this category. iodine could argue, however, that metalworker had benefited from having its debt mainly long term quite than short term. Nevertheless, it appears to choose fracture runniness ratios. 3-35. (Continued) b. Stockholders are close to pertain with profitability. In this category, Jones has much damp ratios than smith.metalworker does have a high(prenominal) return on equity than Jones, but this is due to its muc h larger use of debt. Its return on equity is higher than Jones because it has taken more monetary risk. In terms of otherwise ratios, Jones has its interest and frigid charges well cover and in general its long-term ratios and brainpower are reveal than Smiths. Jones has asset exercise ratios allude to or dampen than Smith and its visit liquidity ratios could bounce develop short-term asset management, and that point was cover in part a. commemorate memorialize that to make actual fiscal decisions more than one years comparative degree data is normally required. exertion comparisons should overly be made.