Problem 1

Particulars M N
Sales $1,080 $1,215
Net Income 54 122
Investment 180 405

a. Which company has the higher profit margin?

b. Which company has the higher investment turnover?
c. Based solely on the data given, in which firm would you prefer to invest?
efer to invest?
Problem 2

The treasurer of Gould's Stores, Inc was interested in what effect, if any, new credit terms have ha
The usual 30-day payment period was shortened to 20 days in an attempt to reduce the investmen
The following information for the current year and the preceding year(prior to the payment period

Current Year Preceding Year

Accounts receivable $1,392,790 1,207,393
Credit Sales 13,035,085 11,597,327

What effect has the new credit policy apparently had?

w credit terms have had on collections of customer accounts.
reduce the investment in accounts receivable.
to the payment period change) is available:
Problem No 3

Tara Whitney was interested in controlling her company's inventory because

she knew that excess inventories were expensive in that they tied up funds.
On the other hand, insufficient inventory levels could result in lost sales.
Whitney obtained the following inventory information from her trade associations,
which reported average figures for companies similar to hers:

Days' Inventory 38 days

Inventory Turnover 11 times

Whitney had the following information from last year, which she considered to be ty

Cost of sales $300,000

Beginning inventory 58,160
Ending inventory 62,880

How does Tara Whitney's company's inventory compare with that of other similar co
 ry because
up funds.

ade associations,

onsidered to be typical year for her company.

of other similar companies?

PROBLEM NO 5

Dupont framework for four industries are presented below:

Assets to Equity Ratio Asset turnover

Retail Jewelry stores 1.427 1.777
Retail grocery stores 1.91 5.844
Electric service companies 2.639 0.601
Legal services firms 1.684 3.468

Compute:
Return on Assets
Retun on Equity
Return on Sales Return on Assets Return on Equity
0.053 2.535779 0.134396287
0.016 11.16204 0.17859264
0.063 1.586039 0.099920457
0.087 5.840112 0.508089744
PROBLEM NO 5

Dupont framework for four industries are presented below:

Assets to Equity Ratio Asset turnover Return on Sales

Retail Jewelry stores 1.427 1.777 0.053
Retail grocery stores 1.91 5.844 0.016
Electric service companies 2.639 0.601 0.063
Legal services firms 1.684 3.468 0.087

Compute: Retail Jewellry Retail Grocery Electric Service

Return on Assets 9% 9% 4%
Retun on Equity 13% 18% 51%
Legal Services
30%
51%
PROBLEM 6

The following information for Francis Company for 2006 has been established:

Price-earnings ratio 42
Stockholders equity $100,000
Debt Ratio 75%
Net income $32,000
Asset turnover 0.8
Current liabilities $115,000
Longterm assets $310,000

Compute:
Return on Equity
Total Assets
Sales
Return on Sales
Current ratio
Total Market value of Shares
Book to Market Ratio

What factors might explain the fact that the book-to-market ratio is so low for Francis company?
The Philip Company

2006 2005 2004

Current Assets 34,000 30,000 37,000
Total Assets 130,000 110,000 90,000
Current Liabilities 25,000 20,000 20,000
Total Liabilities 45,000 40,000 45,000
Stock Holders Equity 85,000 70,000 45,000
Sales 550,000 430,000 300,000
Net Income 35,000 22,000 20,000

Compute
Return on Equity 41% 31% 44%
Return on Sales 6% 5% 7%
Asset Turnover 27% 20% 22%
Asset to Equity 153% 157% 200%
Problem 4

Ralite Company had net income for the year of $20 million. It had 2 million shares of
The year end market price of $82 a share. Dividends during the year were $5.74

1. P-E ratio
2. Dividend yield
3. Dividend payout
million shares of common stock outstanding.
r were $5.74