Introduction to Finance: Harvesting the Money Tree
posted by scooby9132002 .
7) The problem in stretching out the maturity of marketable securities is that
A. longterm rates higher than shortterm rates.
B. interest rates are generally lower.
C. you are legally locked in until the maturity date.
D. there is greater possibility of loss.
I think B

D. there is greater possibility of loss

C. It is the interest rate that is "locked in"; you can't get your money back until the bond matures, unless you sell the bond to someone else. Long term bonds values decrease more in value when the shortterm interest rate rises.

You are an upperlevel manager in a company. Which financial ratios would you consider most useful? Would these ratios be different than the ones you would consider useful as an investor? Why or why not?

You are an upperlevel manager in a company. Which financial ratios would you consider most useful? Would these ratios be different than the ones you would consider useful as an investor? Why or why not?

1 Given the following data for Gary and Co (Millions of Dollars):
Balance Sheet Dec 31 200X
Cash $45
Accounts Payables $45
Marketable Securities 33
Notes Payables 45
Receivables 66
Other Current liabilities 21
Inventory 159
Total Current liabilities $111
Total Current Assets 303
Long term debt 24
Total liabilities $135
Net Fixed Assets 147
Common Stock 114
Total Assets $450
Retained Earnings 201
Total stockholdersâ€™ equity 315
Total liabilities and equity 450
Income Statement Year 200X
Net sales $795
Cost of goods sold 660
Gross profit 135
Selling expenses 73.5
Depreciation 12
EBIT 49.5
Interest expense 4.5
EBT 45
Taxes (40% 18
Net Income 27
Calculate the following ratios:
Ratio Industry Average
Current ratio
Times interest earned
DSO
Inventory Turnover
Sales/Total Assets
Profit margin on sales
Return on Total Assets
Return on Common Equity
2 Given the compressed version of balance sheet and income statement, estimate the amount of external financing needed to increase sales by 20% next year. (use percentage of sales method)
(Dividend payout is 50%)
Balance Sheet (End of the Year)
Assets $2,000 Debt $1000
Equity $1000
Total $2000 $2000
Income Statement
Sales $1000
Costs 800
Net Income 200
3 A firm has outstanding receivables of $125,000. Its credit terms are net 30. If during the past three months credit sales are $100,000, $105,000, and $60,000, how many days of sales are outstanding as receivables?
4 Given the following data, develop weekly cash budget. Minimum cash required is $50 and the beginning cash balance is $100.
Week 1 Week 2 Week 3
Cash Receipts $1,000 $1,100 $900
Cash Disbursements (850) (1450) (1000)
5 Given the following data:
Days inventory = 103 days, Days receivables = 41 days, and Days payables = 81 days
Calculate the cash conversion cycle and operating cycle.
6 Calculate the cost of trade credit given terms of 3/20 net 60.
7 A firm issues $1,000,000 of commercial paper with a maturity of 60 days and a discount rate of 5%. The paper is sold through a dealer who charges 0.25%. What is the effective cost of issuing the commercial paper? 
4 Given the following data, develop weekly cash budget. Minimum cash required is $50 and the beginning cash balance is $100.

You are an upperlevel manager in a company. Which financial ratios would you consider most useful? Would these ratios be different than the ones you would consider useful as an investor? Why or why not?