Student: Komic Sabina

Date: 13.12.2018.

HOMEWORK 1

Problem 6 – 2.

𝐺𝑟𝑜𝑠𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠
a) Days sales in receivables =
Net sales/365

(220 385 + 11 180) 231 565

Days sales in receivables in 2007 = = = 71,6 days
(1 180 178/365) 3 233,4

(240 360 + 12 300) 252 660

Days sales in receivables in 2006 = = = 41,9 days
(2 200 000/365) 6 027,4

𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
b) Acc. Rec. turnover =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑔𝑟𝑜𝑠𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠

1 180 178 1 180 178

Acc. Rec. turnover in 2007 = = = 5,1x
(220 385 + 11 180) 231 565

2 200 000 2 200 000

Acc. Rec. turnover in 2006 = = = 8,7x
(240 360 + 12 300) 252 660

c) Hawk Company receivables were more liquid in 2006 because account receivable
turnover was higher for 3,6x in this year in comparison with 2007. Also in 2006, the
company has needed around 42 days to convert its receivables in cash, and next
year the days to collect these receivables became much higher (almost 72 days)
which is not good.

P 6 – 6.

𝐸𝑛𝑑𝑖𝑛𝑔 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
a) Days sales in inventory =
𝐶𝑂𝐺𝑆/365
 360 500 360 500
Days sales in inventory = = = 62,6 days
2 100 000/365 5 753,4

b) J. Shaffer Company’s days’ sales in inventory is not realistic because this

company is using LIFO method (last-in, first-out) in period of inflation so the costs
are lower than they should be.

c) They could be a helpful guide if there was no inflation so we can do the trend
analysis.

P 7 – 1.

𝐸𝐵𝐼𝑇
a) TIE =
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠

1 079 143 – (792 755 + 264 566) 21 822

TIE = = = 5,1x
4 311 4 311

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤

b) TIE CB =
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠

21 822 + 40 000 61 822

TIE CB = = = 14,3x
4 311 4 311

P 7 – 4.

𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
a) DR =
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

174 979
DR = = 0,41 = 41%
424 201

𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
b) D/E =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝑒𝑞𝑢𝑖𝑡𝑦

174 979
D/E = = 0,7 = 70 %
249 222
 𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
c) Debt to tangible net worth ratio =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝑒𝑞𝑢𝑖𝑡𝑦−𝐼𝑛𝑡𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝑎𝑠𝑠𝑒𝑡𝑠

174 979 174 979

Debt to tangible net worth ratio = = = 0,71 = 71%
249 222−2 324 246 898

d) 41% of company’s assets are financed by debt. In terms of Debt to equity ratio
and Debt to tangible net worth ratio we can conclude that intangible assets are not
crucial and important for this company because these two ratios are close to each
other.