Seminar: Corporate Finance

REI, English section, Year of Study: II

SEMINAR NO 6 Financial Ratios
1. The Following data is known for Kaiser & Co
Cash
100.00
Fixed Assets
283.5
Total Operating Revenues
1000.00
Net Income
50.00
Quick Ratio
2.0
Current Ratio
3.0
Average collection period
40 days
ROE
12%
a) Determine the following:
I.
Accounts receivable
II.
Current Liabilities
III.
Current Assets
IV.
Total Assets
V.
ROA
VI.
Equity
VII. Long term debt
b) 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: 1.5
ROA: 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)
Cash
77500 Accounts payable
12900
0
Accounts Receivable
336000 Notes Payable
84000
Inventories
241500 Other current assets
117000
Total Current Assets

655000 Total Current Liabilities

33000
0

Fixed Assets (net)

292500 Long-Term Debt

25650
0
36100
0
94750

Equity
Total Assets

947500 Total Equity&Liabilities

0
Income Statement (2012)
Total Operating Sales
Cost of Goods Sold
- Raw materials

1607500

- Salaries
- Electricity & water
- Overhead
- Depreciation
Selling Expenses
General Administrative Expenses
EBIT
Interests
EBT
Income tax
Net Income

(717000
)
(453000
)
(68000)
(113000)
(41500)
(115000)
(30000)
70000
(24500)
45500
(18200)
27300

Financial Ratios
Financial Ratio
Current Ratio
Average collection period
Inventory Turnover
Total Assets Turnover
Profit Margin
ROA
ROE

Cordell

Industry Average
2.0
35.0 days
6.7
3.0
1.2%
3.6%
9.0%

a. Determine the financial ratios

b. Build Du-Pont Equation for Cordell and the Industry
c. 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
Cash
Accounts Receivable

Accounts payable
Long-Term Debt

60000

Inventories
Fixed Assets (net)
Total Assets
Total operating revenues

Equity
Retained Earnings
300000 Total Equity&Liabilities
Cost of Goods Sold

97500