Why current assets policy important in particular situation

Assignment Help Financial Accounting
Reference no: EM132636869

The Calgary Company is attempting to establish a current assets policy. Fixed assets are
$600,000, and the firm plans to maintain a 40 percent debt-to-assets ratio. Calgary has no operating current liabilities. The interest rate is 12 percent on all debt. Three alternative current asset policies are under consideration: 40, 50, and 60 percent of projected sales. The company expects to earn 18 percent before interest and taxes on sales of $6 million. Calgary's effective tax rate is 40 percent.

Question 1. What is the expected return on equity under each alternative?

Question 2. Evaluate ROE from owner point of view and suggest which option is best for him?

Question 3. Suggest which option would you like if you are managers of the company and do not have much concern about business?

Question 4. Why current assets policy is important in this particular situation?

Reference no: EM132636869

Questions Cloud

Which cancers originate from connective tissue : Which cancers originate from connective tissue? Carcinoma refers to abnormal cell proliferation originating from which tissue origin?
View several online videos on unified communications : Find and view several online videos on unified communications.
Find what current price of bonds for white sand corporation : 7.5% annual coupon bonds at their par value of P1,000. What is the current price of the bonds, given that they now have 19 years to maturity?
Describe the reelection and effects of repeal : Committee for a Responsible Federal Budget states "According to our latest estimates, repealing the Affordable Care Act (ACA) in its entirety would cost.
Why current assets policy important in particular situation : Calgary Company, Suggest which option would like if you are managers of the company and do not have much concern about business?
How do you define success : Why is it important to understand your own strengths and weaknesses? How can becoming more self-aware help you reach your goals?
Identifying the best approach for teaching : The RN to BSN program at Grand Canyon University meets the requirements for clinical competencies as defined by the Commission on Collegiate Nursing Education.
Explain what challenges may a starbucks have encountered : Explain What challenges may a Starbucks have encountered (or is likely to encounter) in terms of incorporating ethics into financial management practices
Identify the concept in watsons theory of caring : Identify an outcome of nursing practice in your area of practice that can be improved. For example, if you work in home health, you may identify that throw.

Reviews

Write a Review

Financial Accounting Questions & Answers

  Determine the firms net income for the period ending march

Determine the cost of the company's land by preparing a trial balance. Determine the firm's net income for the period ending March 31.

  Prepare the journal entry under basis

On June 3, Pronghorn Company sold to Chester Company merchandise having a sale price of $3,800 with terms of 4/10, n/60, f.o.b. shipping point. An invoice totaling $91, terms n/30, was received by Chester on June 8 from John Booth Transport Service f..

  Dividend policy theories

Dividend changes can be used by management as a credible communication tool to signal investors about future earnings under which of the subsequent dividend policy theories?

  What future taxable amounts are

As a result of these differences, future taxable amounts are? A Corporation has three financial statement elements for which the December 31, year

  Investment portfolios in trading and available

Does Google carry investment portfolios in trading and available-for-sale securities?

  What is the differential cost from the acceptance of offer

Stryker Industries received an offer from an exporter for 15,000 units of product at $17.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data is available: Domestic unit sales price $..

  What capital cost is assigned to the land

Manager is currently on-site facilitating the production startup. This manager is an annual salary of $85,000. What capital cost is assigned to the land?

  Find how much value as company created for shareholders

Calculate Watervan's economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

  Comprehensive annual financial report on princes county

Comprehensive Annual Financial Report of PRINCE GEORGE's COUNTY. Prepare a Power Point presentation... 8-10 slides... COMPREHENSIVE ANNUAL FINANCIAL REPORT on PRINCE's GEORGE's COUNTY

  Variant of fiscal-year budgeting twelve-month projection

A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed:

  Mountain view hospital

Mountain View Hospital has purchased new lab equipment for $238,296. The equipment is expected to last for three years and to provide cash inflows.

  What is lecompte optimal capital structure

LeCompte Learning Solutions, What is LeCompte's optimal capital structure, and what is the firm's cost of capital at this optimal capital structure?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd