DeVry Chicago ACCT 346 Week 7 Problems

December 14, 2020 3 min read

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 #2

Sam 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 2
Cash and marketable securities 160,000 ..150,000
Accounts receivable, net …….175,000… 170,000
Inventory ……………………..140,000 …150,000
Total current assets …………475,000 ……470,000
Current Liabilities:
Accounts payable …………….150,000 ….140,000
Accrued liabilities …………….50,000 …….60,000
Notes payable, short term ……140,000 …..140,000
Total current liabilities ………..340,000 ……340,000

Sales ……………………..$5,500,000
Cost of goods sold ………$2,750,000

Required: Calculate the Inventory Turnover ratio.

What does this ratio tell management?

Class: problem #1

The Lance Company, provides various services.

Financial information concerning the most recent
year appears below:

Sales $12,000,000
Net operating income $3,300,000
Average operating assets $30,000,000
Ignore the impact of income taxes in your calculation.
Compute the return on investment (ROI) for the company

Class: Problem #2 (similar to #1)
The Young Co., provides various services.

Financial information concerning the most recent
year (not a successful year) appears below:
Sales $80,000,000
Net operating income $500,000
Average operating assets $100,000,000
Ignore 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 year

CLASS: 3rd Problem

Using the Statements on Page 541 and 542 for Great Oaks Furniture, Let’s discuss the following ratios for 2012:

a) Return on Assets
b) Quick ratio
c) Current ratio
d) Debt to equity ratio

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