Finance course Q1.What is net working capital? Why a low value for this number m
ID: 3146328 • Letter: F
Question
Finance course
Q1.What is net working capital? Why a low value for this number might be considered
Undesirable?
Q2. . If you were given a choice of investing in an account that paid quarterly interest and one that paid monthly interest, which one should you choose if they both off are the same stated interest rate and why?
Q3. DuPont Equation: Lemmon Enterprises has a total asset turnover of 4.2 and a net profit margin of 9.5%. If its equity multiplier is 1.70, what is the ROE for Lemmon Enterprises? LO 4
Q4. Brittany Willis is looking to invest for retirement, which she hopes will be in 20 years. She is looking to invest $22,500 today in U.S. Treasury bonds that will earn interest at 6.25 percent annually. How much will she have at the end of 20 years? (Round to the nearest dollar.)
Q5. What is the difference between a growing annuity and a growing perpetuity?
Explanation / Answer
net working capital = Cash and cash equivalents+ investments+ Trade accounts receivable+ Inventory- Trade accounts payable
net working capital is sum of all current liabilites and current assests
if the net working capitial is high then the oraganiztion is in profit the networking capital will effect long term run of business if networking capital is high we can assume the business grow gquickly
if net working capital is low will effect the long term run of business the business will not grow quickly and the business runs in losses if networking capital is low some times it may lead to disclose of business
2) suppose your investing $100
with compound quaterly and compound monthly at rate 10%
compound quaterly
A=100(1+10/400)4=$110.382
compounded monthly
A=100(1+10/1200)12
A=$110.47
so for same amount and same interest the compound monthly is best than compound quaterly
Brittany Willis is looking to invest for retirement, which she hopes will be in 20 years. She is looking to invest $22,500 today in U.S. Treasury bonds that will earn interest at 6.25 percent annually. How much will she have at the end of 20 years
A=p(1+r/100)n
A=22500(1+6.25/100)20
A=22500*3.3618
A=75641.702
amount after 20 years =$75,642
3)ROE = ROA × Equity multiplier
ROA=total asset turnover * net profit margin =4.2*9.5=39.9
ROE=39.9*1.7=67.83
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