Homework Answers
Answer:
Option B - working capital is relatively high
Explanation:
Conservative approach is an strategy of working capital financing
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Certain financing plans are termed conservative when O risk is increased O working capital is relatively...
Positive working capital for a firm implies that current assets are partially financed by long-term financing...
Positive working capital for a firm implies that current assets are partially financed by long-term financing fixed assets are partially financed by current liabilities current assets are completely financed by current liabilities firm has no short-term debt
Kelly & Assoc. is developing an asset financing plan. Kelly has $500,000 in current assets, of...
Kelly & Assoc. is developing an asset financing plan. Kelly has $500,000 in current assets, of which 15% are permanent, and $700,000 in capital assets. The current long-term rate is 11%, and the current short-term rate is 8.5%. Kelly's tax rate is 40%. a) Construct three financing plans— the first: perfectly hedged, the second: conservative, with 80% of assets financed by long-term sources, and the third: aggressive, with only 60% of assets financed by long-term sources. b) If Kelly's earnings...
Problems n the problems below, you can use a market risk premium of 3.5% and a...
Problems n the problems below, you can use a market risk premium of 3.5% and a tax rate of 40% where none is specified 1. The followin The following is the balance sheet for Ford Motor Company as of December 31, 1994 (in milions: Liabilities Assets $ 11,635 Accounts Payable Cash Receivables Inventory S 19,927 61,469 10,128 91,524 45,586 36,240 Debt due within 1 year Other Current Liabilities Current Liabilities Short-Term Debt Long-Term Debt Equity Total Liabilities 2,721 50,596 36,200...
SHORT-TERM FINANCING AND OPTIONS CONTRACT Gregg, the CFO and the board of directors of Baldwin Inc....
SHORT-TERM FINANCING AND OPTIONS CONTRACT Gregg, the CFO and the board of directors of Baldwin Inc. have taken enough time to discuss capital budgeting, dividend policy, and capital structure and now want to focus their attention on short-term finance and cash planning of the company. The board is considering the ways to improve the working capital management of the company. They are also discussing various sources of short-term financing and the minimum amount of money to borrow in the short-term...
True or False ROE is increased with Debt levels. When companies have significant interest-bearing Noncurrent Liabilities,...
True or False
ROE is increased with Debt levels. When companies have significant interest-bearing Noncurrent Liabilities, these are viewed as a source of Invested Capital. ROE measures NOPAT/Equity. Including Cash and Cash Equivalents stockpiles in Current Assets distorts the value of current assets required to operate the business. ROA rises with high levels of Intangible Assets. There is a single widely accepted ROIC calculation. Long-term Marketable Securities are not as liquid as Short-term Marketable Securities and needs to be segregated....
HORT-TERM FINANCING AND OPTIONS CONTRACT Gregg, the CFO and the board of directors of Baldwin Inc....
HORT-TERM FINANCING AND OPTIONS CONTRACT Gregg, the CFO and the board of directors of Baldwin Inc. have taken enough time to discuss capital budgeting, dividend policy, and capital structure and now want to focus their attention on short-term finance and cash planning of the company. The board is considering the ways to improve the working capital management of the company. They are also discussing various sources of short-term financing and the minimum amount of money to borrow in the short-term...
Suppose that the financial ratios of a potential borrowing firm take the following values: X1 = Net working capital/Tot...
Suppose that the financial ratios of a potential borrowing firm take the following values: X1 = Net working capital/Total assets = 0.10, X2 Retained earnings/Total assets 0.20, X3 Earnings before interest and taxes/Total assets 0.22, X4 = Market value of equity/Book value of long-term debt 0.60, X5 = Sales/Total assets ratio 0.90 Calculate the Altman's Z-score for this firm. (Round your answer to 2 decimal places.) Altman's Z-score This firm falls in which category of bankruptcy risk based on its...
The following table includes quarterly working capital levels for your firm for the next year. Quarters...
The following table includes quarterly working capital levels for your firm for the next year. Quarters ($000) 1 2 Cash 96 96 96 96 Accounts Receivable 207 94 110 596 Inventory Accounts Payable 210 490 900 42 101 91 96 91 If you hold only $96,000 in cash at any time, what is your maximum short-term borrowing and when? On: Calculate the short-term financing needs below: (Round to the nearest integer.) ($000) Q1 Q2 Q3 Q4 Short-term financing needs $...
HORT-TERM FINANCING AND OPTIONS CONTRACT Gregg, the CFO and the board of directors of Baldwin Inc....
HORT-TERM FINANCING AND OPTIONS CONTRACT Gregg, the CFO and the board of directors of Baldwin Inc. have taken enough time to discuss capital budgeting, dividend policy, and capital structure and now want to focus their attention on short-term finance and cash planning of the company. The board is considering the ways to improve the working capital management of the company. They are also discussing various sources of short-term financing and the minimum amount of money to borrow in the short-term...
Working capital: Mukhopadhya Network Associates has a current ratio of 1.60, where the current ratio is defined as follo...
Working capital: Mukhopadhya Network Associates has a current ratio of 1.60, where the current ratio is defined as follows: current ratio = current assets/current liabilities. The firm’s current assets are equal to $1,233,265, its accounts payables are $419,357, and its notes payables are $351,663. Its inventory is currently at $721,599. The company plans to raise funds in the short-term debt market and invest the entire amount in additional inventory. How much can notes payable increase without the current ratio falling...
Problems n the problems below, you can use a market risk premium of 3.5% and a tax rate of 40% where none is specified 1. The followin The following is the balance sheet for Ford Motor Company as of December 31, 1994 (in milions: Liabilities Assets $ 11,635 Accounts Payable Cash Receivables Inventory S 19,927 61,469 10,128 91,524 45,586 36,240 Debt due within 1 year Other Current Liabilities Current Liabilities Short-Term Debt Long-Term Debt Equity Total Liabilities 2,721 50,596 36,200...
True or False
ROE is increased with Debt levels. When companies have significant interest-bearing Noncurrent Liabilities, these are viewed as a source of Invested Capital. ROE measures NOPAT/Equity. Including Cash and Cash Equivalents stockpiles in Current Assets distorts the value of current assets required to operate the business. ROA rises with high levels of Intangible Assets. There is a single widely accepted ROIC calculation. Long-term Marketable Securities are not as liquid as Short-term Marketable Securities and needs to be segregated....
Suppose that the financial ratios of a potential borrowing firm take the following values: X1 = Net working capital/Total assets = 0.10, X2 Retained earnings/Total assets 0.20, X3 Earnings before interest and taxes/Total assets 0.22, X4 = Market value of equity/Book value of long-term debt 0.60, X5 = Sales/Total assets ratio 0.90 Calculate the Altman's Z-score for this firm. (Round your answer to 2 decimal places.) Altman's Z-score This firm falls in which category of bankruptcy risk based on its...
The following table includes quarterly working capital levels for your firm for the next year. Quarters ($000) 1 2 Cash 96 96 96 96 Accounts Receivable 207 94 110 596 Inventory Accounts Payable 210 490 900 42 101 91 96 91 If you hold only $96,000 in cash at any time, what is your maximum short-term borrowing and when? On: Calculate the short-term financing needs below: (Round to the nearest integer.) ($000) Q1 Q2 Q3 Q4 Short-term financing needs $...
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