Answer Each Of The Questions In The Following Unrelated Situ

Answer Each Of The Questions In The Following Unrelated Situationsa

Answer each of the questions in the following unrelated situations, focusing on financial ratios, inventory management, and forecast calculations based on provided data. The tasks include calculating current liabilities, inventory levels, various ratios, cost savings, and financial analysis metrics for different companies using given financial data.

Paper For Above instruction

The assignment entails performing several financial calculations and analysis based on provided corporate data. These include determining current liabilities given ratios and balance sheet data, recalculating inventory levels based on turnover changes, assessing the impact of borrowing on liquidity ratios, computing ratios before and after dividends, estimating cost savings from inventory turnover improvements, and deriving multiple financial ratios for different companies to assess liquidity, profitability, efficiency, and solvency.

Firstly, the calculation of current liabilities involves utilizing the current ratio and acid-test ratio in conjunction with known components such as inventories and prepaid items. For example, with a current ratio of 6:1 and an acid-test ratio of 1:1, alongside inventories amounting to $494,800, the current liabilities can be derived by setting up equations based on the ratios and solving for liabilities (Brigham & Ehrhardt, 2016).

Secondly, inventory level adjustments based on turnover rates require understanding the relationship between sales, inventory, and turnover ratios. If last year’s average inventory was $159,000 with a turnover of 6, and this year’s turnover increases to 8 with the sales volume remaining constant, then the average inventory for this year can be calculated through proportionate changes in turnover, reflecting improved inventory efficiency (Wild, Subramanyam, & Halsey, 2014).

Thirdly, the impact of borrowing on liquidity ratios must be assessed by recalculating the current ratio and acid-test ratio after the infusion of cash. The effects include increased current assets, but since liabilities are unchanged, the ratios adjust accordingly, illustrating the company's liquidity position and how borrowing influences short-term solvency (Higgins, 2012).

Fourthly, the changes in ratios after dividends involve recalculating current assets and liabilities post-dividend payment, which reduces assets, thereby altering the current ratio and providing insight into liquidity stability after dividend distributions (Fraser & Ormiston, 2017).

Fifthly, estimating cost savings from improved inventory turnover involves comparing the current costs associated with inventory management at an initial turnover rate (9 times) versus an increased rate (12 times). The expected savings are based on reduced holding costs or improved cash flow, calculated through the relationship between cost of goods sold and inventory turnover (Brigham & Ehrhardt, 2016).

Further analysis includes computing ratios—such as current ratio, inventory turnover, accounts receivable turnover, book value per share, earnings per share, debt to assets, profit margin, and return on equity—for companies like Wamser and others, to evaluate liquidity, efficiency, profitability, and leverage. These calculations involve applying standard financial formulas, and interpreting the results in the context of financial health and operational efficiency (Wild et al., 2014).

Additionally, the financial ratios for Bradburn Corporation are computed for fiscal years 2014 and 2015, including current ratio, quick ratio, inventory turnover, return on assets, and percentage changes in sales, COGS, gross margin, and net income. These metrics collectively serve to assess the company's liquidity, profitability, asset utilization, and growth over the years, facilitating informed lending decisions. The computations rely on extracting relevant figures from balance sheets and income statements, converting them into ratios following accepted accounting principles (Higgins, 2012; Fraser & Ormiston, 2017).

Finally, the overarching goal of these calculations and analyses is to evaluate the financial stability, efficiency, and profitability of the companies involved, providing crucial insights for lending, investment, or management decisions. Ensuring accuracy and clarity in deriving ratios and understanding their implications are fundamental to sound financial analysis and strategic planning.

References

• Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice. Cengage Learning.
• Fraser, L. M., & Ormiston, A. (2017). Understanding Financial Statements. Pearson.
• Higgins, R. C. (2012). Analysis for Financial Management. McGraw-Hill Education.
• Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2014). Financial Statement Analysis. McGraw-Hill Education.