Problem 1

40=( AR/7,300,000) * 365

(AR*365)/7,300,000 =40
AR/20,000 =40
20,000AR/20,= 40 * 20,000
AR=P800,000

Problem 2
Equity multiplier = total assets/equity = 2.4
so for every 2.4 dollars of assets there is 1 dollar of equity.
Since equity + liabilities = total assets, we know that there is 1.4 dollars of debt.
Debt/assets ratio= total debt/total assets
1.4/2.4= 0.58333 or 58.33%

Problem 3
Total Assets=P1,000,000,000
Current Liabilities=P100,000,000
Long Term debt=P 3,000,000,000
Common Equity= P6,000,000,000
Shares of common stocks outstanding= P800,000,000
Per share= 32

=6,000,000,000 / 800,000,000
Book Value= 7.5
Market/Book ratio= per share/Book value
32/7.5= 4.2666

Problem 4
EPS= P2
Book value per share= P20
Market/book ratio= 1.2x

M/B= P / BVPS
1.2= P / 20
Price=24
P/E= 24/2
= 12x

Problem 5
Profit Margin= 2%
Equity Multiplier=2
Sales=P100,000,000
Total Assets=P 50,000,000

ROE= PM (sales / TA) EM

 =2 (100 / 50) 2
=8%

Problem 6
TATO= sales / TA
3.2= P6,000,000 / TA
TA=P1,875,000
Equity=P1,875,000*50%
Equity=P937,500

ROE= (NI/S) TATO (TA/E)

12%= (NI / 6000000) 3.2 (1875000/937500)
12%= (NI / 6000000) * 6.4
Net Income= P112,500

Problem 7
ROA= Net Income/ Total Assets
0.8=6,000,000/TA
Total Assets=7,500,000

(Earnings before Interest and Taxes-Interest)= NI/(1-Tax Rate)

Tax= (EBIT - Interest) * Tax Rate
=923,077 * 0.35
= P323,077

NI= EBIT - Interest - Tax

600,000= EBIT - 225,000 - 323,077
EBIT= 1,148,077

Basic Earning Power= EBIT / TA

=1,148,077 / 7,500,000= 15.31%
BEP= 15.31%

Problem 8
N/A

Problem 9
BEP= EBIT / TA
.15= EBIT / 12,000,000,000
EBIT= 1,800,000,000

ROA=NI / TA
.05=NI / 12,000,000,000
NI=P 600,000,000
 EBT= NI / (1 - Tax Rate)
=600,000,000 / (1 - .4)
= P1,000,000,000

INT= EBIT- EBT

=1,800,000,000-1,000,000,000
=P800,000,000

Times Interest Earned= EBIT/INT

=1,800,000,000/800,000,000
=2.25x

Problem 10
Tax= (EBIT - I) * Tax Rate
=(1,000,000 - 300,000) * .34
=P238,000

NI= EBIT - I - Taxes

=1,000,000 - 300,000 - 238,000
=P462,000

EA= 1- DA
=1- .6
=0.4

ROE= PM TATO Equity Multiplier

= (NI / Sales) TATO (TA / Equity)
=(462,000/10,000,000) 2 (1 / EA)
=.0924 * (1 / EA)
=0.0924 * (1 / 0.4)
=23.1%

Problem 11
Present Current Ratio= Current Assets/ Current Liabilities
=1,312,500/525,000
=2.5

Minimum Current Ratio= (1,312,500+ NP)/(525,000=NP)=2.0

1,312,500+NP=1,050,000+2NP
1,312,500+NP-1,312,500=1,050,000+NPx-1,312,500
NP=2NP-262,500
NP-2NP=2NP-262,500-2NP
NP=P262,500

Problem 12
 35=( AR/7,500,000) * 365
AR=P71,917

35=( AR/7,500,000*0.15) * 365

AR=61,130
71,917 -61,130
change in AR=P10,787

Problem 13
Sales Total asset turnover= Sales/total assets
1.5=sales/300,000
sales=1.5*300,000
Sales=P450,000

Accounts Receivable DSO= AR/ Average sales per day

DSO= AR/ Annual sales/365
36.5=AR/450,000/365
36.5=AR/1,232.8767
36.5*1,232.8767=AR
AR=P44999.99955 or P45,000

Inventory Inventory turnover= sales/inventory

5=450,000/inventory
inventory=450,000/5
Inventory=P90,000

Fixed Assets Fixed assets turnover= sales/ fixed assets

1.5=450,000/fixed assets
fixed assets=450,000/1.5
=P300,000

Cash Total Assets=Cash+AR+Inventory+Fixed Assets

300,000=Cash+45,000+90,000+300,000
300,000=Cash+435,000
Cash=300,000-435,000
Cash=P-135,000

Problem 14
A
Current Current= CA/CL
=655,000/330,000
=1.98x

Quick Quick= (CA - Inv) / CL

= (655,000 - 241,500) / 330,000
 =1.25

DSO DSO= AR/ (Sales / 365)

= 336000 / (1607500 / 365)
=76.3 days

Inventory Turnover Inventory Turnover= Sales / Inventory

= 1,607,500 / 241,500
=6.66x

Total Assets Turnover Total Assets Turnover= sales / TA

=1,607,500/947,500
=1.7x

Profit Margin PM= NI / Sales

= 273,000 / 1,607,500
1.70%

ROA ROA= NI / TA
=273,000 / 947,500
=2.9%

ROE ROE= NI / TE
=273,000 / 361,000
=7.6%

Total debt/Total assets DR= debt/ assets

=(947,500 - 361,000) / 947,500
=61.9%

B
N/A

C
The firm's DSO is more than twice as long as the industry average,
it dictates that the firm should tighten credit.
The total assets turnover ratio is well below the industry average so
sales should be increased, assets decreased, or both.
While the company's profit margin is higher than the industry average,
its other profitability ratios are low compared to the industry
Net income should be higher given the amount of equity and assets.
.4 dollars of debt.