Log in
HomeStudy Guides420,000US230,000

FIN-3403 Study Guide - Midterm Guide: Dividend Yield, Market (Place), Espn Bottomline

78 views3 pages
School
FSU
Department
Finance
Course
FIN-3403
Professor
Professor Christiansen

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Questions and problems: #1-8; #9 part a; #10-16; #18, 19 and 23 parts a and b. Concepts and critical thinking questions: #1 - 6 and #10. Concepts and crititcal thinking questions: #1 - 5. Questions and problems: #1 -6; 9; 22-24 and #26. If inventory is purchased with cash, then there is no change in the current ratio. Thus, if debt is paid off with cash, the current ratio increases if it was initially greater than 1. 0. If pressed by its short-term creditors and suppliers for immediate payment, the firm might have a difficult time meeting its obligations. A current ratio of 1. 50 means the firm has 50% more current assets than it does current liabilities. This probably represents an improvement in liquidity; short-term obligations can generally be met completely with a safety factor built in. A current ratio of 15. 0, however, might be excessive. Any excess funds sitting in current assets generally earn little or no return.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers

Related Documents

FIN-3403 Chapter Notes - Chapter 2: Cash Flow, Market Liquidity, Accounts Receivable
burgundybat929
FIN-3403
Final Exam
Study Guide
FIN-3403 Midterm: FIN3403 Test 2 Rvw.docx
limechinchilla185
FIN-3403 Lecture Notes - Lecture 91: Capital Asset Pricing Model, Windstream Holdings, Capital Budgeting
violethippopotamus705

Related Questions

Use the informtion below to answer questions 1-11: Cash $20,000.00 A/R $70,000.00 Inventory $100,000.00 A/P(Short Term) $160,000.00 Bonds Payable (long term debt) $400,000.00 Common Stock (Outstanding Shares 1,000) $30,000.00 Retained Earnings $180,000.00 Fixed Assets $580,000.00 From the information above, 1) calculate Total Current Assets. It may be more helpful to first create a Balance Sheet from the information provided. 2)Calculate Total Current Liabilities. 3)From the information above, calculate Total Assets. 4)From the information above, calculate Total Owners Equity. 5)From the information above, calculate Total Long Term Liabilities. 6)From the information above, calculate Total Liabilities and Owners Equity. 7)From the above information, calculate the Current Ratio. 8)Calculate the Quick Ratio. 9)Based on the Current Ratio and Quick Ratio, would you extend credit to this company on a short term basis. Provide your reasoning. I am looking for a short paragraph answer. 10)If the Company's Net Income for the year was $30,000, calculate the Company's Earnings Per Share. 11)The Company's Ending Retained Earnings was $180,000. If it paid no dividends for the year and had Net Income of $30,000 for the year, what was its beginning Retained Earnings balance?

Felicia & Fred recently hired a new designer who has considerable experience in product development of handbags and small leather goods. The intent was for the designer to initially work with the company’s innovation team to introduce a gift with purchase (GWP): a logo wristlet purse that can accommodate a Smartphone. This GWP will be offered as a limited edition during the holiday season and customers or recipients will be encouraged through social media to participate in a survey regarding the product to determine future potential demand for handbags and other small leather goods bearing the Felicia & Fred logo.

The potential inclusion of handbags as part of the company’s product will require significant addition to the total value of Felicia & Fred’s working capital. The entire mix of assets and liabilities as part of the balance sheet might change.

Consider the following:

Question 1

Name three working capital elements that may change as a result of expansion into a new product line. Select one of these working capital elements and indicate why this element will change under the proposed program. Also within this selected element what are some of the issues Felicia and Fred can do to optimally manage? What are the risks of poor management of the element you selected?

Question 2

In order to maintain the company’s debt covenants, it must maintain a current ratio of 1.5. Its current ratio is presently 1.75 and has been maintained at that level for some time. What happens to a company’s current ratio if it takes on additional short-term debt or accounts payable to fund current assets when the current ratio is greater than one? Or Less than one?

Given your consideration of the part 2 result, should the company fund a working capital increase with short-term debt or long-term debt?

Chapter 13 Assignment page 419 Problem 13.1 & 13.2

13.1.a. General Hospital has a current ratio of 0.5. Which of the following actions would improve (increase) this ratio? (Hint: Create a simple balance sheet that has a current ratio of 0.5. Then, Judge how the transactions below would affect the balance sheet).

1.Use cash to pay off current liabilities.

2.Collect some of the current accounts receivable.

3.Use cash to pay off some long-term debt.

4.Purchase additional inventory on credit (i.e., accounts payable)

5.Sell some of the existing inventory at cost (book value).

Insert your response here.

b. Now assume that General Hospital has a current ratio of 1.2. In this situation, which of the above actions would improve this ratio?

Insert your response here.

13.2 Southwest Physician, a medical group practice in Oklahoma City, is just being formed. It will need $2 million of total assets to generate $3 million in revenues. Furthermore, the group expects to have a total margin of 5 percent. The group is considering two financing alternatives. First, it can use all equity financing by requiring each physician to contribute his or her pro rate share. Second, the practice can finance up to 5o percent of its assets with a bank loan. Assuming that the debt alternative has no impact on the expected total margin, what is the difference between the expected return on equity (ROE) if the group finances with 50 percent debt versus the expected ROE if it finances entirely with equity capital?

Insert your response here.