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##### DeVry Chicago ACCT 346 Week 7 Problems Solution

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solution

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Question;CLASS: problem #1: (For help, see pg 446-447)A) Assume WAX Inc has net income $7,000,000, interest expense of $1,500,000 and a tax rate of 40%. Calculate the NOPAT.b)If this (same) company had sales of $10,000,000 what is the company's profit margin?C) What do these amounts tell us?Class: Problem #2Sam Co. specializes in selling shavers.In the most recent year, the company had net operating income of$6,000,000 on sales of $90,000,000. The company's average operating assets for the year were $30,000,000 and its minimum rate of return is 18%.Ignore the impact of income taxes in your calculation.Compute the company's residual income for the year.(A little help on Problem #2:Residual Income is the income we have in excess of our minimum desired. Just calculate the desired income --in this case it is at 18%-- and any amount over that is "residual".)Problem #3:Current Assets:.....................year 1........year 2Cash and marketable securities 160,000..150,000Accounts receivable, net.......175,000... 170,000Inventory..........................140,000...150,000Total current assets............475,000......470,000Current Liabilities:Accounts payable................150,000....140,000Accrued liabilities................50,000.......60,000Notes payable, short term......140,000.....140,000Total current liabilities...........340,000......340,000Sales..........................$5,500,000Cost of goods sold.........$2,750,000Required: Calculate the Inventory Turnover ratio.What does this ratio tell management?Class: problem #1The Lance Company, provides various services.Financial information concerning the most recentyear appears below:Sales $12,000,000Net operating income $3,300,000Average operating assets $30,000,000Ignore the impact of income taxes in your calculation.Compute the return on investment (ROI) for the companyClass: Problem #2 (similar to #1)The Young Co., provides various services.Financial information concerning the most recentyear (not a successful year) appears below:Sales $80,000,000Net operating income $500,000Average operating assets $100,000,000Ignore the impact of income taxes in your calculation.a) Compute the return on investment (ROI) for the company.b) Discuss what you think about their yearCLASS: 3rd ProblemUsing the Statements on Page 541 and 542 for Great Oaks Furniture, Let's discuss the following ratios for 2012:a) Return on Assetsb) Quick ratioc) Current ratiod) Debt to equity ratio

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