Question

solving Problems A retailer's current assets are $7.4 milli The retailer wants to be rells him that, to borrow m ets are $7.4 million. Presently, his current ratio is 1.5. ants to borrow money to fund an expansion: however, a lender horrow money, the retailer must bring his current ratio up t's current liabilities? By how much must he reduce ilities to obtain a loan, assuming that current assets remain What are the retailer's current liabilities? By h to 2.0. What a his current liabilities constant? 2. Complete the following grid: Net Sales Cast of goods sold Gross margin-dollars Gross margin-percent Expenses-dollars Expenses-percent Net income-dollars Net income-percent Dollars expressed in millions Store 1 Store 2 Store 3 Store 4 Store 5 Store 6 $12. 0 80.7 $155.0 1,438.8.131.6 $4,056.7 6.1 $42.6 59.2 $951.2 $90.0 1,619.5 $5.9 $38.1 95.8 $487.6 41.6 $2,387.2 149.2% 47.2% 61.8% 33.97|31.6% 58.8% $4.2 31-9 $88.2 464.9 $41.1 2,259.7 35.0% 39.56 56.9% 32.3% 31.2% 55.71 1.7 $6.2 97.6 $22.7 $0.5 $128.5 14.2% 7,7% 4,9% 1.6% 0.4% 3.2% 3. Review the component percentages for each store in problem 2 above. Which store is the best performer? The poorest performer? What advice would you give to the poorest performer relative to improving performance? Suggest how to increase net income by increasing gross margin and/or decreasing expenses by specific dollar amounts. Problem #3

Answer 1

Answer-1
Current Scenerio
Current ratio	1.5
Current assets	$ 7.4 million
Current liabilities	=7.4/1.5
	= $ 4.93 million
Revised Scenario
Current ratio	2
Current assets	$ 7.4 million
Current liabilities	=7.4/2
	= $ 3.7 million
Change in current liability	= $(4.93-3.7)million
	= $ 1.23 million
Answer -2
	Store 1	Store 2	Store 3	Store 4	Store 5	Store 6
Net Sales	12	80.7	155	1438.8	131.6	4056.7
Cost of goods sold	6.1	42.6	59.2	951.2	90	1669.5
Gross margin- dollars	5.9	38.1	95.8	487.6	41.6	2387.2
Gross margin- percent	49.17%	47.21%	61.81%	33.89%	31.61%	58.85%
Expenses- dollars	4.2	43.3	88.2	464.9	41.1	2258.7
Expenses- percent	35.00%	53.66%	56.90%	32.31%	31.23%	55.68%
Net income- dollars	1.7	5.2	7.6	22.7	0.5	128.5
Net Income -percent	14.17%	6.44%	4.90%	1.58%	0.38%	3.17%
Answer-3
From net margin point of view Store1 is best performer and Store 5 is worst performer.