Reference no: EM132505204

Lionel Co. and Smithfield Co. are close competitors. Last year, both firms had the same level of cost of goods sold, but Lionel Co. turned its inventory 4.8 times during the year while Smithfield Co. turned its inventory every 62 days. Which one of the following statements is true if the objective is to keep average inventory as low as possible?

1. Lionel Co. did a better job since its inventory turnover was lower.
2. Smithfield Co. did a better job since its days' sales in inventory was lower.
3. Lionel Co. did a better job since its days' sales in inventory was lower.
4. Smithfield Co. did a better job since its inventory turnover was lower.
5. Lionel Co. did a better job since its level of inventory was lower.

Question 1: A firm has sales of $782,600, a profit margin of 7.23 percent, and a capital intensity ratio of 1.31. What is the firm's return on assets?

Question 2: LOG Homes have a profit margin of 12.6 percent and a dividend payout ratio of 30 percent. The firm projects that these percentages will remain constant while the current sales of $2.6 million increase by 10 percent next year. What is the anticipated addition to retained earnings for next year?

Question 3: A very short-term creditor, such as a supplier, is primarily interested in a firm's:

Question 4: A firm has an 11 percent return on assets, a capital intensity ratio of .98, and total assets of $687,000. What is the profit margin?

Question 5: A firm has current assets of $1,600, net fixed assets of $6,000, accounts payable of $800, long-term debt of $2,400, equity of $4,400, sales of $7,500, costs of $5,300, and a tax rate of 35 percent. Assume costs, accounts payable, and current assets all increase at the same rate as sales. Also assume 60 percent of net income is paid out in dividends and that the firm is currently operating at 90 percent of capacity. If sales grow at 20 percent, compute the external financing need.