Maddox Smith Staff asked 5 years ago


8.39 Calculating and analyzing days inventory turnover, days debtors, current ratio and quick ratio The income statement for Ugg Company for the year ending 30 June 2016 is detailed below. Sales revenue $425 000 Cost of sales 325 000 Gross profit 100 000 Operating expenses 60 000 Profit $40 000 The operating expenses include $17  500 of interest expense. The following amounts have been extracted from the company’s balance sheet at 30 June 2016: Accounts receivable $62 500 Prepaid expenses        5 000 Cash        7 500 Inventory        37 500 Bank overdraft        6 500 Accounts payable        40 000 Accrued expenses         3 000 Required Calculate and interpret the following: a) days inventory turnover b) days debtors c) current ratio d) quick ratio If you are contemplating providing a short-term loan to Ugg Company, discuss what these ratios reveal about the associated risk.     8.41 Analysing a company’s market performance   Visit the Yahoo!7 Finance website ( and call up information on JB Hi-Fi Ltd (symbol: JBH.AX). a) Identify JB Hi-Fi Ltd’s current share price (day 1), the previous day’s share price (day 0) and the share price return from day 0 to day 1. b) You are considering purchasing shares in JB Hi-Fi Ltd. Identify the current bid and ask price for the shares. c) The summary information includes some market based ratios. Explain what each of the following represents and how the ratio is calculated: price–earnings ratio; earnings per share; and market capitalisation. d) Review the current month’s analysts’ recommendations for JB Hi-Fi Ltd and comment on the market’s sentiment regarding JB Hi-Fi Lt     9.31 Greenacres is a garden design and landscaping business. At 30 June 2016, it had a bank balance of $26  500. Provided below are estimates for receipts and payments for the three months ending 30 September 2016.       July               August              September Receipts   Fees $140 000 $160 000 $200 000 Proceeds from the sale of surplus non-current assets  100 000   Payments   Salaries and wages   70 000   70 000               70 000 Supplies     8 500      9 200 12 000 New equipment   120 000   Purchase of plants   42 000    45 000 61 000   Required a) Prepare a monthly cash budget for the three months ending 30 September 2016. b) The owners were wondering what the effect would be on the cash position if they did not buy the new equipment, but instead took advantage of a new rental arrangement. The equivalent equipment would cost $10  000 per month under the rental arrangement. Redraft the cash budget to show the impact of the rental alternative. Based on the information available, should they lease or buy the equipment?       10.25 Emy Fong has been operating a single-product firm for three years. As this product is now well established in the market, Fong is thinking about adding two new products to her range. Outline the impact of her decision on the calculation of her new break-even point.      10.39 High Mountain Tours (with a fleet of 20 four-wheel-drive minibuses) operates five-day package tours to the Snowy Mountains from Canberra in all seasons. The following financial data for each package are provided to you:   Revenue   Average revenue per person $2 200 Costs (variable per person)   Transport to and around Canberra $600   Accommodation  600   Meals  450   Entrance fees    40  1 690 Fixed costs $4 000 quired a) Calculate the approximate number of package tours necessary for High Mountain Tours to break even. b) Calculate the contribution margin ratio. c) Calculate revenue required to earn an operating income of $30 000. d) Calculate the decrease in variable costs necessary to maintain the break-even point calculated in requirement (a) if fixed costs increase by $3000. (Also calculate the per unit decrease.)