99. Problem
One: Working Capital Management
Consider each of the following situations independently of each other.
For each of the situations provide one example of when the underlying
circumstances may be such that the observed trend is unfavorable and one
example of when the underlying circumstances are favorable.
a. Current ratio increases from one period to the next
b. Accounts receivable turnover increases from one period to the next
c. Accounts payable turnover increases from one period to the next
100. Problem
Two: Cash Levels and Current Ratio
Indicate the effect of the following actions on cash levels and current
ratio. Assume the company has a current ratio greater than one. Indicate
whether the effect is to increase (I), decrease (D) or if it has no effect
(NE). Consider each action independently of others.
101. Problem
Three: Wal*Mart
Refer to the financial statements for Wal*Mart, below
102. Problem
Four: Dell Financial Risk
Following are Dell's condensed consolidated statement of financial
position and condensed consolidated statement of operations, in millions
(unaudited).
Statement of Financial Position
103. Problem
Five: Hurtal Corporation
Selected ratios for Hurtal Corporation for year ended Year 1 are:
104. Problem
Six: Wal*Mart
Refer to Wal*Mart's financial statements, below.
105. Problem
Seven: Consolidation vs. Equity
Company ABC has a large, wholly owned consolidated finance subsidiary.
For each of the following ratios, state the effect (higher, lower, or no
effect) that consolidation has on the ratio of Company ABC compared to the
ratio it would have if it accounted for its finance subsidiary using the equity
method. Briefly explain why each effect occurs.
a. Debt/equity ratio
b. Return on assets
c. Times interest earned
106. Problem
Eight: Effect of Interest Rate Changes on Leverage
Assume that company ABC issues $20 million in long-term debt at par
when interest rates were low and company DEF issued $20 million in long-term
debt at par when interest rates were high. Assuming that interest rates remain
high:
a. Which company will have the higher debt/capital ratio (assume no other debt
and identical equity)?
b. ABC's debt matures in 18 months and DEF's debt matures in 9 years. What
would be the effect on your analysis?
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