Project #31506 - Week 7

Hi, I will include the Excel worksheet and the link to the text I'm using (Ch 28, 29). Thank you

Brealey, R. A., Myers, S. C. & Allen, F. (2011). Principles of Corporate Finance, Concise Edition, (2nd ed.). New York, NY: McGraw-Hill Irwin.

Problem 18-2

Table 18.11 (p. 484 and also provided below) gives abbreviated balance sheets and income statements for EsteÌe Lauder Companies. Calculate the following ratios:

Ratio

Formula (in words)

Calculation

TIP: Interest rate - p. 468

a.

Return on assets

T

C

b.

Operating profit margin

T

C

c.

Sales-to-assets ratio

T

C

d,

Inventory turnover

T

C

e.

Debt–equity ratio

T

C

f.

Current ratio

T

C

g.

Quick ratio

T

C

 Problem 18-23 Suppose that you wish to use financial ratios to estimate the risk of a company's stock. Which of those that we have described in this chapter are likely to be helpful? Can you think of other accounting measures of risk? Answer: T

Problem 19-11

If a firm pays its bills with a 30-day delay, what fraction of its purchases will be paid in the current quarter? In the following quarter? What if the delay is 60 days?

Step 1:

Worksheet - 30 day delay

Worksheet - 60 day delay

Month of Purchase

Month for Payment

Month of Purchase

Month for Payment

2012 Qtr. 4

Dec

T

2012 Qtr. 4

Nov

T

2013 Qtr.1

Jan

T

Dec

T

Feb

T

2013 Qtr.1

Jan

T

Mar

T

Feb

T

2013 Qtr.2

Apr

T

Mar

T

May

T

2013 Qtr.2

Apr

T

Jun

T

May

T

2013 Qtr.3

Jul

T

Jun

T

Aug

T

2013 Qtr.3

Jul

T

Sep

T

Aug

T

2013 Qtr.4

Oct

T

Sep

T

Nov

T

2013 Qtr.4

Oct

T

Dec

T

Nov

T

Dec

T

Step 2:

30 day delay - Payment made at end of 2013 Qtr1

Fraction from last quarter

F

Fraction from this quarter

F

Fraction for next quarter

F

60 day delay - Payment made at end of 2013 Qtr1

Fraction from last quarter

F

Fraction from this quarter

F

Fraction for next quarter

F

 Problem 19-17 Corporate financial plans are often used as a basis for judging subsequent performance.                                                                                                                                                                What do you think can be learned from such comparisons?                                                          What problems are likely to arise, and how might you cope with these problems? Answer: What do you think can be learned from such comparisons? T What problems are likely to arise, and how might you cope with these problems? T

 Subject Business Due By (Pacific Time) 05/23/2014 06:00 pm
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