BE24-9 Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming
year are $144,000,000 and $99,000,000, respectively. Short-term interest rates are expected to
average 10%. If Heartland can incr
...
BE24-9 Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming
year are $144,000,000 and $99,000,000, respectively. Short-term interest rates are expected to
average 10%. If Heartland can increase inventory turnover from its present level of 9 times a
year to a level of 12 times per year, compute its expected cost savings for the coming year.
Inventory Turnover = Cost of Goods Sold / Average Inventory
$99,000,000 / Average Inventory = 9
Average inventory = $144,000,000 / 9 = $11,000,000
$99,000,000 / Average Inventory = 12
Average Inventory = $144,000,000 / 12 = $8,250,000
Cost savings = ($11,000,000 - 8,250,000) x 10% = $275,000
*E24-6 (Ratio Analysis) Howser Inc. is a manufacturer of electronic components and
accessories with total assets of $20,000,000. Selected financial ratios for Howser and the
industry averages for firms of similar size are presented below.
2013 Howser Industry
(2011, 2012, 2013)
Average Current ratio (2.09), (2.27), (2.51) 2.24
Quick ratio (1.15), (1.12), (1.19) 1.22
Inventory turnover (2.40), (2.18), (2.02) 3.50
Net sales to stockholders’ equity (2.75), (2.80), (2.95) 2.85
Net income to stockholders’ equity (0.14), (0.15), (0.17) 0.11
Total liabilities to stockholders’ equity (1.41), (1.37), (1.44) 0.95
*CA24-13 (Effect of Transactions on Financial Statements and Ratios) The transactions
listed below relate to Wainwright Inc. You are to assume that on the date on which each of the
transactions occurred, the corporation’s accounts showed only common stock ($100 par)
outstanding, a current ratio of 2.7:1, and a substantial net income for the year to date (before
giving effect to the transaction concerned). On that date, the book value per share of stock was
$151.53.
[Show More]