HW 2 Fundamentals of corporate finance
Score: 120
1.
out of 120 points (100%)
award:
10 out of
10.00
points
Just Dew It Corporation reports the following balance sheet information for 2011 and 2012.
JUST DEW IT CORPORATION
2011 and 2012 Balance Sheets
Assets
2011
Current assets
Cash
Accounts receivable
Inventory
Total
Liabilities and Owners’ Equity
2011
2012
$ 11,000
27,000
75,000
$ 14,250
36,750
96,250
$ 113,000
$147,250
Current liabilities
Accounts payable
Notes payable
2012
$ 54,000
14,800
$ 63,750
20,500
$ 68,800
$ 84,250
Long-term debt
Owners’ equity
Common stock and paid-in surplus
Retained earnings
$ 50,000
$ 40,000
$ 55,000
226,200
$ 55,000
320,750
Total
Net plant and equipment
$287,000
$352,750
Total
$281,200
$375,750
Total assets
$400,000
$500,000
Total liabilities and owners’ equity
$400,000
$500,000
Based on the balance sheets given for Just Dew It:
a. Calculate the current ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Current ratio
2011
1.64
times
2012
1.75
times
b. Calculate the quick ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Quick ratio
2011
0.55
times
2012
0.61
times
c. Calculate the cash ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Cash ratio
2011
0.16
times
2012
0.17
times
d. Calculate the NWC to total assets ratio for each year. (Round your answers to 2 decimal places.
(e.g., 32.16))
NWC ratio
2011
11.00
%
2012
12.60
%
e. Calculate the debt–equity ratio and equity multiplier for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Debt-equity ratio
Equity multiplier
2011
0.42
1.42
times
2012
0.33
1.33
times
f. Calculate the total debt ratio and long-term debt ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Total debt ratio
Long-term debt ratio
2011
0.30
times
0.15
times
2012
0.25
times
0.10
times
Learning Objective: 03-02 How to compute and, more importantly, interpret some common
ratios.
1.
out of 120 points (100%)
award:
10 out of
10.00
points
Just Dew It Corporation reports the following balance sheet information for 2011 and 2012.
JUST DEW IT CORPORATION
2011 and 2012 Balance Sheets
Assets
2011
Current assets
Cash
Accounts receivable
Inventory
Total
Liabilities and Owners’ Equity
2011
2012
$ 11,000
27,000
75,000
$ 14,250
36,750
96,250
$ 113,000
$147,250
Current liabilities
Accounts payable
Notes payable
2012
$ 54,000
14,800
$ 63,750
20,500
$ 68,800
$ 84,250
Long-term debt
Owners’ equity
Common stock and paid-in surplus
Retained earnings
$ 50,000
$ 40,000
$ 55,000
226,200
$ 55,000
320,750
Total
Net plant and equipment
$287,000
$352,750
Total
$281,200
$375,750
Total assets
$400,000
$500,000
Total liabilities and owners’ equity
$400,000
$500,000
Based on the balance sheets given for Just Dew It:
a. Calculate the current ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Current ratio
2011
1.64
times
2012
1.75
times
b. Calculate the quick ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Quick ratio
2011
0.55
times
2012
0.61
times
c. Calculate the cash ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Cash ratio
2011
0.16
times
2012
0.17
times
d. Calculate the NWC to total assets ratio for each year. (Round your answers to 2 decimal places.
(e.g., 32.16))
NWC ratio
2011
11.00
%
2012
12.60
%
e. Calculate the debt–equity ratio and equity multiplier for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Debt-equity ratio
Equity multiplier
2011
0.42
1.42
times
2012
0.33
1.33
times
f. Calculate the total debt ratio and long-term debt ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))
Total debt ratio
Long-term debt ratio
2011
0.30
times
0.15
times
2012
0.25
times
0.10
times
Learning Objective: 03-02 How to compute and, more importantly, interpret some common
ratios.