Fin515 Homework 2

In: Business and Management

Submitted By Charlson020
Words 876
Pages 4
Problem 2-29
Yes, a firm with positive net income can run out of cash. It could run out of cash if it spends too much on financing activities. For an example a company could pay too much of a dividend, pay off too much long term debt, or buying back too many shares of stock.

Problem 2-30
a) Current Ratio = Current Assets/Current Liabilities
$51.94B / 33.06B = 1.5711
b) Quick Ratio = (Cash and Cash Equivalent + Marketable Securities + Accounts Receivables) / Current Liabilities
($27.65B + 14.30B) / 33.06B = 1.2689
c) Cash Ratio = (Cash and Cash Equivalent + Invested Funds) / Current Liabilities
$27.65B / 33.06B = .8364
d) Apple has more liquid assets than Dell relative to current liabilities

Problem 2-31
a) Accounts Receivable Days = ((Accounts Receivable / (Sales/365)) 2013 2012 2011 2010 2009
Accounts Receivable 86.1 76.9 69.8 69.8 88.6
Sales 604.1 510.7 424.6 363.8 404.3
Sales / 365 1.65507 1.39918 1.16329 .9967 1.1077
Accounts Receivable Days 52.02 54.96 60.00 70.03 79.99
The accounts receivable period has decreased every year since 2009. This essentially means that it is taking Mydeco less time/days to collect its account receivables. This is a positive thing for the company.

b) Inventory Days = ((Inventory / (Sales/365)) 2013 2012 2011 2010 2009
Inventory 35.3 31.7 28.4 30.9 33.7
Sales 604.1 510.7 424.6 363.8 404.3
Sales / 365 1.65507 1.39918 1.16329 .9967 1.1077
Inventory Days 21.33 22.66 24.41 31.00 30.42
More the most part the Inventory Days has decreased every year which means Mydecco is becoming more efficient in converting its inventory into sales. This is a positive thing for the company.

c) Current Ratio = (Current Assets – Liabilities) 2013 2012 2011 2010 2009
Current Assets 206.4 186.1 184.5 169.6 171.1
Current Liabilities 41.4 34.9 29 24.3 25.4
Current Ratio 165 151.2 155.5 145.3 145.7

The working capital…...

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