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2 years ago

Just Dew It Corporation reports the following balance sheet information for 2017 and 2018.

Business

2 answers:

KIM [24]2 years ago

5 0

Answer:

a. Current ratio for 2017 - 1.14

Current ratio for 2018 - 1.38

b. Quick ratio for 2017 - 0.30

Quick ratio for 2018 - 0.41

c. Cash ratio for 2017 - 0.09

Cash ratio for 2018 - 0.11

d. NWC to Total Assets 2017 - 0.03

NWC to Total Assets 2018 - 0.07

e. Debt equity ratio 2017 - 0,49 and equity multiplier 1,49

Debt equity ratio 2018 - 0.36 and equity multiplier 1.36

f. Total Debt ratio 2017 0.33 and long term debt ratio 0.10

Total Debt ratio 2018 0.27 and long term debt ratio 0.08

Explanation:

Current ratio is calculated by dividing the current assets by the current liabilities

2017 2018

$ $

Current assets 84,000 105.800

Current Liabilities 73,440 76.600

Current ratio

2017 - 84,000/ 73,440 1.14

2018 105,800 / 76,600 1.38

Quick ratio is calculated by excluding the inventory balances from the current assets.

Current assets excl. inventory 22,220 31,200

Current Liabilities 73,440 76.600

Quick Ratio

2017 22,220/73,440 0.30

2018 31,200/76,600 0.41

Cash ratio is calculated by only considering cash and cash equivalents and dividing by the current liabilities

Cash balances 6,500 8.600

Current Liabilities 73,440 76.600

Cash ratio

2017 - 6,500/ 73,440 0.09

2018 8,600 / 76,600 0.11

NWC to Total assets is calculated by dividing the net working capital to the total assets of the company

Current assets 84,000 105.800

Current Liabilities 73,440 76.600

Net working capital 10.560 29,200

Total assets 320,000 400,000

NWC to Total assets Ratio

2017 - 10,560/320,000 0.03

2018 - 29,200/400,000 0.07

Debt equity ratio is calculated by dividing the total liabilities of the company with its total equity

Current Liabilities 73,440 76,600

Long Term Liabilities 32,000 30,000

Total debt of the company 105,440 106,600

Common stock 40,000 40,000

Retained Earnings 174,560 253,400

Total Equity 214,560 293,400

Debt Equity ratio

2017 - 105,440/214,560 0,49

2018 - 106,600/293,400 0.36

Equity multiplier is calculated by dividing the total assets over total equity

Total assets 320,000 400,000

Total Equity 214,560 293,400

Equity multiplier

2017 - 320,000/214,560 1.49

2018 - 400,000/293,400 1.36

Total debt ratio is calculated by dividing the total debt with the total assets. The long term debt ratio divides the long term debt with the total assets

Total debt of the company 105,440 106,600

Total assets 320,000 400,000

The total debt ratio

2017 - 105,440/320,000 0.33

2018 - 106,600/400,000 0.27

Long Term Liabilities 32,000 30,000

Total Equity 214,560 293,400

2017 - 32,000/ 214,560 0.10

2018 - 30,000/ 293,400 0.08

IceJOKER [234]2 years ago

4 0

Answer:

Cash : (2017)= 6560 ; (2018) = 8600

Account Payable: (2017) = 51840 ; (2018) = 53000

Account receivable: (2017) = 16160 ; (2018) = 22600

Notes payable: (2017) = 21600 ; (2018) = 23600

Inventory : (2017) = 61280 ; (2018) = 74600

Long-term debt: (2017)= 32000 ; (2018) = 30000

Owners equity : (2017)= 40000 ; (2018) = 40000

Retained earning: (2017) = 174560 ; (2018) = 253400

Net Plant & equipment: (2017) = 236000 ; (2018) = 294200

Total Assets: (2017) = 320000 ; (2018) = 400000

Total equity and liabilities: (2017) = 320000 ; (2018) = 400000

Current assets = Cash + Account receivable + Inventory

Current liabilities = Accounts payable +Notes payable

As we know that : Current ratio = Current assets / current liabilities.

(2017) = (6560+16160+61280) / (51840+21600)=84000/73440=1.14

(2018) =(8600+22600+74600)/ (53000+23600)=105800/76600=1.38

As we know that : Quick ratio = (Cash + securities + Account receivable)/ Current liabilities.

(2017)=(6560+16160)/73440=22720/73440= 0.30

(2018)= (8600+22600)/76600=31200/76600=0.40

As we know that Cash ratio = cash &cash equivalent / current liabilities

(2017) = 6560 / 73440 = 0.089

(2018) = 8600 / 76600 =0.112

As we know that NWC to total asset ratio = net working capital / Total assets.

Net working capital = current assets - current liabilities.

(2017) NWC=84000-73440=10560

(2018) NWC = 105800-76600=29200

NWC ratio:

(2017) = 10560 /320000= 0.033

(2018)= 29200 /400000= 0.073

As we know that debt to equity ratio = Total liabilities / Total shareholder equity.

Total liabilities (2017)= 51840 + 21600 + 32000 = 105440

Total liabilities (2018)= 53000 + 23600 + 30000 = 106600

Total equity (2017) =40000+174560= 214560

Total equity (2018) = 40000+253400 = 293400

ratio (2017) = 105440/214560=0.49

ratio(2018) =106600/293400=0.36

As we know that total debts ratio = Total debt / Total assets

Total debt (2017) = 51840+21600+32000 =105440

Total debt (2018) = 53000+23600+30000=106600

ratio (2017) =105440/320000=0.32

ratio (2018) =106600/400000=0.26

As we know that long-term debt ratio = long-term debt / total assets

(2017) = 32000/320000=0.1

(2018) =30000/400000=0.075

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2 years ago

They want to make a profit of $55,498 Unit Variable costs = $11 Unit selling price is = $37 Fixed costs = $18,470 How many units

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2,845 units

Explanation:

To find the answer you need to consider that the profit is equal to the sales minus the costs.

Let's consider that x is the number of units sold

Sales= Price per unit*number of units sold

Sales= 37x

Variable cost= Cost per unit*number of units sold

Variable cost= 11x

Fixed cost= 18,470

55,498=37x-11x-18,470

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According to this, the answer is that they need to sell 2,845 units to make the desired profit.

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3 years ago

If Wild Widgets, Inc., were an all-equity company, it would have a beta of 0.9. The company has a target debt-equity ratio of .4

Veronika [31]

Answer:

a. 6.5%

b. 13.06%

c. 10.91%

Explanation:

Cost of debt of a bond is yield to maturity. Yield to maturity is the rate of return that a investor actually receives or a borrows actually pays on a bond. It is long term return or payment which is expressed in annual term.

Formula for yield to maturity is as follow

Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]

By placing values in the formula

Assuming the bond face value is $1,000

Yield to maturity = [ (1000x7.2) + ( 1,000 - $1,090 ) / 20 ] / [ ( 1,000 + $1,090 ) / 2 ]

Yield to maturity = [ $72 + ( 1,000 - $1,090 ) / 20 ] / $1,045

Yield to maturity = [ $72 - $4.5 ] / $1,045

Yield to maturity = $67.5 / $1,045

Yield to maturity = 6.5%

So, the cost of Debt is 6.5%

As 0.9 is the unlevered beta, We need Levered beta due to restructuring of capital.

Beta Levered = Beta Unlevered x ( 1 + ( 1 - tax rate ) x Debt / Equity)

Beta Levered = 0.9 x ( 1 + ( 1 - 0.35 ) x 0.4 )

Beta Levered = 1.134

Cost of equity can be calculated using CAPM

CAPM calculated the expected return on an equity investment based on the risk free rate, market premium and risk beta of the investment.

Formula for CAPM is as follow

Expected return = Risk free Rate + Beta ( Market premium)

As we know the Risk premium is the difference of market return and risk free rate.

Expected return = Risk free Rate + Beta ( Market Return - Risk free Rate )

Ra = Rf + β ( Rm - Rf )

Ra = 4.1% + 1.134 ( 12% - 4.1% )

Ra = 13.06%

Cost of Equity is 13.06%

WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.

According to WACC formula

WACC = ( Cost of equity x Weightage of equity )+ ( Cost of debt ( 1- t) x Weightage of debt )

Placing the values in formula

If the debt to equity 0.4 the equity value should be 1 and total capital is 1.4 ( 1 + 0.4 )

WACC = ( 13.06% x 1 / 1.4 )+ ( 6.5% ( 1- 0.35) x 0.4 / 1.4 ) = 9.71% + 1.2% = 10.91%

WACC is 10.91%

4 0

3 years ago