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timurjin [86]
3 years ago
8

Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 210,000 Total CL $ 70,00

0 Total CA $294,000 Long-term debt 70,000 Net fixed assets 126,000 Common equity 280,000 Total assets $420,000 Total liab. and equity $420,000 Sales $280,000 Net income $ 21,000 The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.30, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?
Business
1 answer:
Tcecarenko [31]3 years ago
3 0

Answer:

The ROE will increase by 7.69% to 14.29% from 7.5%

Explanation:

Current liabilities:

account payable 42,000

Other  28,000

Total Liabilities: 70,000

IF we want a current ratio of 2.3 then:

70,000 x 2.3 = 161,000 Current assets are needed.

Right now, the companny has 294,000 current assets so it will make inventories decrease by:

294,000 - 161,000 = 133,000

Then with that will purchase common stock:

280,000 - 133,000 = 147,000 common stock will be outstanding

The Return on equity will be:

21,000 / 147,000 = 0.142857 = 14.29%

While currently the ROE is:

21,000/280,000 = 0.075 = 7.5%

There will be an increase for: 14.29 - 7.5 =  6.79%

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Henry Crouch's law office has traditionally ordered ink refills 55 units at a time. The firm estimates that carrying cost is 40%
defon

Answer:

Its action would be optimal given an ordering cost of $28.31 per order

Explanation:

According to the given data we have the following:

economic order quantity, EOQ= 55 units

annual demand, D=235

holding cost per one unit per year, H=40%×$11=$4.4

ordering cost, S=?

In order to calculate the ordering cost we would have to use the following formula:

EOQ=√(<u>2×D×S)</u>

                (H)

Hence, S=<u>(EOQ)∧2×H</u>

                     2×D

           S=<u>(55)∧2×4.4</u>

                   2×235

          S=<u>13,310</u>

                470

          S=$28.31

Its action would be optimal given an ordering cost of $28.31 per order

4 0
3 years ago
Vroom-Vroom manufactures miniature cars and has determined that its total manufacturing cost of $1,500,000 is a mixture of unit-
abruzzese [7]

Answer:

$784,434 will be allocated to the Retail division

Explanation:

See attached file

8 0
3 years ago
The price of bread goes up. What happens to DEMAND for butter?
nikklg [1K]

Answer:

A. The demand curve shifts to the left

Explanation:

Bread and butter are compliment goods. They offer the consumer a high utility when consumed together. An increase in demand for bread will increase the demand for butter.  Changes in the price of bread will affect the demand for butter.

An increase in the price of bread leads to a decrease in demand. Reduction in bread demand means that butter consumption will decline as there will be less bread to apply butter. A decrease in demand will prompt the demand curve to shift inwards.

3 0
3 years ago
Consider the following information about production in quarter 1 of 2019. Firm T produces 600 tires at a cost of $28 each, and s
bekas [8.4K]

Answer:

$3,860

Explanation:

<u>Value of stock at the end of Firm T:</u>

Firm T has stock of 20 tires at the end of the year

The cost price is $28 per tire

Value = Closing stock * Cost price of each tIres

Value = 20 * $28

Value = $560

<u />

<u>Value of stock at the end of Firm B:</u>

Firm B has stock of 10 bicycles at the end of the year

The cost price is $330 each

Value = Closing stock * Cost price of each bicycle

Value = 10 * $330

Value = $3,300

Value of the inventory investment = Value of stock at the end of Firm T + Value of stock at the end of Firm B

Value of the inventory investment = $560 + $3,300

Value of the inventory investment = $3,860

8 0
2 years ago
Identify four reasons that nations trade with one
Annette [7]
1. To get items they couldn't get in that country.

2. To get goods they couldn't get in that country.

3. To get different resources they couldn't get in that country.

4. To Get electronics and other technology.
4 0
3 years ago
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