Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 2, Problem 10QP
Cash Flow to Creditors. The December 31, 2015,
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The below tables shows Dynamic Mattress’s year-end 2016 and 2018 balance sheets, and its income statement for 2017.
Dynamic MattressYear-End Balance Sheet for 2016(figures in $ millions)
Assets
Liabilities and Shareholders’ Equity
Current Assets:
Current Liabilities:
Cash
$
46
Bank loans
$
46
Marketable securities
23
Accounts payable
140
Accounts receivable
123
Inventory
215
Total current assets
$
407
Total current liabilities
$
186
Fixed assets:
Gross investment
$
263
Long-term debt
38
Less depreciation
83
Net worth (equity and retained earnings)
363
Net fixed assets
$
180
Total assets
$
587
Total liabilities and net worth
$
587
Dynamic MattressYear-End Balance Sheet for 2017(figures in $ millions)
Assets
Liabilities and Shareholders’ Equity
Current Assets:
Current Liabilities:
Cash
$
176.0
Debt due within a year (bank…
Suppose the following information was taken from the 2017 financial statements of FedEx Corporation, a major global transportation/delivery company.
(in millions)
2017
2016
Accounts receivable (gross)
$ 3,302
$ 4,396
Accounts receivable (net)
3,273
4,367
Allowance for doubtful accounts
29
29
Sales revenue
32,226
39,472
Total current assets
6,758
6,532
Answer each of the following questions.
(a)
Calculate the accounts receivable turnover and the average collection period for 2017 for FedEx Corporation. (Round answers to 1 decimal place, e.g. 12.5. Use 365 days for calculation.)
Dollarama reported the following selected data (in millions):
2017
2016
Total assets
$1,934.3
$1,863.5
Total liabilities
2,186.7
1,763.1
Profit
519.4
445.6
Income tax expense
196.3
166.8
Interest expense
39.9
33.0
(a)
Calculate the debt to total assets and interest coverage ratios for 2017 and 2016. Did Dollarama's solvency improve, worsen, or
remain unchanged in 2017? (Round answers to 1 decimal place, eg. 52.2 or 52.2%.)
2017
2016
Debt to total assets
Interest coverage
times
times
The Dollarama's solvency
Chapter 2 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 2.1 - Prob. 2.1ACQCh. 2.1 - Prob. 2.1BCQCh. 2.1 - What do we mean by financial leverage?Ch. 2.1 - Explain the difference between accounting value...Ch. 2.2 - What is the income statement equation?Ch. 2.2 - What are the three things to keep in mind when...Ch. 2.2 - Why is accounting income not the same as cash...Ch. 2.3 - What is the difference between a marginal and an...Ch. 2.3 - Do the wealthiest corporations receive a tax break...Ch. 2.4 - Prob. 2.4ACQ
Ch. 2.4 - Prob. 2.4BCQCh. 2.4 - Why is interest paid not a component of operating...Ch. 2 - What is the relationship between current assets...Ch. 2 - What is the purpose of the income statement?Ch. 2 - Prob. 2.3CCh. 2 - Prob. 2.4CCh. 2 - Liquidity. What does liquidity measure? Explain...Ch. 2 - Accounting and Cash Flows. Why is it that the...Ch. 2 - Book Values versus Market Values. In preparing a...Ch. 2 - Prob. 4CTCRCh. 2 - Prob. 5CTCRCh. 2 - Prob. 6CTCRCh. 2 - Prob. 7CTCRCh. 2 - Net Working Capital and Capital Spending. Could a...Ch. 2 - Prob. 9CTCRCh. 2 - Firm Values. Referring back to the examples used...Ch. 2 - Building a Balance Sheet. Bear Tracks, Inc., has...Ch. 2 - Building an Income Statement. Pharrell, Inc., has...Ch. 2 - Dividends and Retained Earnings. Suppose the firm...Ch. 2 - Per-Share Earnings and Dividends. Suppose the firm...Ch. 2 - Prob. 5QPCh. 2 - Tax Rates. In Problem 5, what is the average tax...Ch. 2 - Calculating OCF. Hailey, Inc., has sales of...Ch. 2 - Prob. 8QPCh. 2 - Calculating Additions to NWC. The December 31,...Ch. 2 - Cash Flow to Creditors. The December 31, 2015,...Ch. 2 - Cash Flow to Stockholders. The December 31, 2015,...Ch. 2 - Prob. 12QPCh. 2 - Market Values and Book Values. Klingon Widgets,...Ch. 2 - Prob. 14QPCh. 2 - Using Income Statements. Given the following...Ch. 2 - Prob. 16QPCh. 2 - Prob. 17QPCh. 2 - Prob. 18QPCh. 2 - Net Income and OCF. During the year, Belyk Paving...Ch. 2 - Prob. 20QPCh. 2 - Prob. 21QPCh. 2 - Prob. 22QPCh. 2 - Prob. 23QPCh. 2 - Net Fixed Assets and Depreciation. On the balance...Ch. 2 - Tax Rates. Refer to the corporate marginal tax...Ch. 2 - Prob. 1CCCh. 2 - Prob. 2CC
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- The 2017 annual report of Tootsie Roll Industries contains the following information. (in millions) December 31, 2017 0000 December 31, 2016 Total assets $930.9 $920.1 Total liabilities 197.1 208.6 Net sales 515.7 517.4 Net income 80.7 67.2 Instructions Compute the following ratios for Tootsie Roll for 2017. a. Asset turnover. b. Return on assets. c. Profit margin on sales. d. How can the asset turnover be used to compute the return on assets?arrow_forwardI need assistance in finding the ratios for the following (see attached sheets). Calculate the following financial ratios for 2016 and 2017 7. Quick ratio 8. Operating-cash-flow-to-current-liabilities ratio (2015, current liabilites = $4,890.1 million) 9. Accounts receicable turnover (2015, accounts receivable = $1,386.7 million)arrow_forwardCentral Bank has the following information (in $million). 2017 ($ million) 2018 ($ million) Revenue 780 890 Net income 240 375 Assets 22,450 27,850 Equity 2,250 2,980 Which of the following statements about Central Bank is CORRECT? Select one: a. From 2017 to 2018, its Return on Equity decreased, Return on Assets decreased, and Leverage Multiplier increased. b. From 2017 to 2018, its Return on Equity increased, Return on Assets increased, and Leverage Multiplier decreased. c. From 2017 to 2018, its Return on Equity increased, Return on Assets increased, and Leverage Multiplier increased. d. From 2017 to 2018, its Return on Equity increased, Return on Assets decreased, and Leverage Multiplier increased.arrow_forward
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