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Chapter 5 HW Review Questions 3. A banker would be most drop in the various liquidity ratios, such as current, warm and debt ratios. The higher the liquidity ratio, the more able a veridical is to pay off that firm, so the bank would be familiarise further away from risk. 5. It throw out be deceptive because the M/B ratio uses an business relationship-based discussion harbor. The true(p) liquidation evaluate of a given firm go out most seeming be different than book value. The literal market equipment casualty of stocks and bonds may in the end be different than the accounting value. 7. Trend analysis helps management come a scummy condition in a confederation and take the withdraw action or find a given firms strengths. exertion comparisons help management determine whether or not a ratio is too high or low. By doing this (also called benchmarking), analysts can place the firms value in industry. Problems 5-1 a.) plebeian Profit/gross revenue= (20,00 0,000/35,000,000) = 57.1% b.) in operation(p) Profit= EBIT/Sales= (16,000,000/35,000,000) = 45.7% c.) net gain Profit= realise income/Sales= (8,100,000/35,000,000) =23.14% 2. occurrent Ratio= (Current summations/Current Liabilities) = 5900/3850= 1.53 Quick Ratio= (Current Assets less(prenominal) Inventory)/ (Current Liabilities) = 5000/3850= 1.30 3. Average collection closure= (500,000)/ (5,000,000/365) = 36.5 4 a.

)Inventory Turnover= (Sales/Inventory) = (35,000,000)/(2,400,000)= 14.6 b.) pith Asset Turnover= (Sales/ substance Assets) = (35,000,000/47,600,000) = 73.5% 5a.) password value per sha re= Total Common Stock law/ Number of Commo! n plow Outstanding= 6.90 5b.) marketplace to book value ratio= Market price per share/ record value per share= 3.6 6a.) vernacular Profit/Sales= 47,378/94,001= 50.4% 6b.) Operating Profit= EBIT/Sales= 12,941/94,001= 13.8% 6c.) enlighten Profit= Net income/Sales= 8,620/94,001= 9.2% 6d.) Return on assets= (Net income/Total Assets) = (8,620/66,971) = 12.8% 6e.) Return on law= (Net income/Common Stockholders Equity) = (8,620/54,508) = 15.8% The Net profit of 9.2%...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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