The balance sheet and income statement shown below are for OLD Inc. Note that th
ID: 2663047 • Letter: T
Question
The balance sheet and income statement shown below are for OLD Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.Balance Sheet (in millions)
Assets
Cash and securities 2,500
Accounts receivable 11,500
Inventories 16,000
Total current assets 30,000
Net plant and equipment 20,000
Total Assets 50,000
Liabilities and Equity
Accounts payable 9,500
Notes payable 7,000
Accruals 5,500
Total current liabilities 22,000
Long-term bonds 15,000
Total debt 37,000
Common stock 2,000
Retained earnings 11,000
Total common equity 13,000
Total liabilities and equity 50,000
Income Statement (in millions):
Net sales 87,500
Operating costs expect depreciation 81,813
Depreciation 1,531
EBIT 4,156
Less Interest 1,375
EBT 2,781
Taxes 973
net Income 1,808
Other Data:
Shares outstanding (millions) 500
Common dividends $632.73
Int rate on notes payable & LT bonds 6.25%
Federal plus state income tax rate 35%
Year-end stock price $43.39
3. What’s the firm’s days sales outstanding? Assume a 365-day year
4. What’s the firm’s total assets turnover ratio?
5. What’s the firm’s total inventory turnover ratio?
6. What’s the firm’s TIE?
Explanation / Answer
3) Days sales outstanding = 365 days / Receivables turnover but Receivables turnover = Sales / Accounts receivables = 87,500 / 11,500 = 7.60 times Days sales outstanding = 365 days / 7.60 = 48 days 4) Total asset turnover ratio = Sales / Total assets = 87,500 / 50,000 = 1.75 times 5) Total inventory turnover ratio = Cost of goods sold / Inventory = $81,813 / $16,000 = 5.11 times 6) Times-Interest Earned ratio = EBIT / Interest = $4,156 / $1,375 = 3.022 times
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