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What is the firm tie ratio

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A. The inventory turnover and current ratios are related. The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged. Do you agree? Explain why.

B. In the past year, KGT had revenues of $30 million, cost of goods sold of $2.5 million, and depreciation expenses of $200,000. The firm has a single issue of debt outstanding with a face value of $1.0 million, market value $0.92 million, and a coupon rate of 8%. What is the firm's TIE ratio?

C. A firm has $600,000 in current assets and $150,000 in current liabilities. It decides to use cash to pay off $50,000 in accounts payable. How would it affect the value of the company? If the firm borrows money from a bank (instead of using the cash balance) to pay off the accounts payable, how would it affect the value of the company? Explain your answers carefully.

Reference no: EM133043765

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