Part 2 A firm has a days sales outstanding (DSO) of 20 days. The industry average DSO is 15 days….

Part 2

1. A firm has a days sales outstanding (DSO) of 20 days. The industry average DSO is 15 days. Is this a good or poor sign about the firm’s performance? Explain your answer. (2 points)

1. A firm has a time interest earned ratio of 3.6. The industry average interest earned ratio is 2.7. Is this a good or poor sign about the firm’s performance? Explain your answer (2 points)

1. H-mart has a quick ratio of 0.82, current liabilities of $628,000 and inventories of $975,000. What is the firm’s current ratio? (Hint: find current assets first and then calculate the current ratio) (3 points)

1. Wiley Sports has sales of $882,880 and account receivables of $124,000. What is the company’s receivables turnover ratio? What is the firm’s Day Sales Outstanding (DSO)? Do we prefer a higher or lower account receivable turnover ratio? (4 points)

1. Wiley Sports Inc. has a ROE of 12.8 percent, a profit margin of 1.6 percent, and a total asset turnover ratio of 1.82 times. Its rival company Atlantic Sports Inc. also has a ROE of 12.8 percent but has outperformed Wiley Sports with a profit margin of 2.9 percent and a total asset assets turnover ratio of 2.5 times. Explain why Atlantic Sports can only achieve the same level of profitability as Wiley Sports measured by the ROE. (3 points)

1. The BlueSky Inc. has the following ratios: Sales/Total asset = 5.5; ROA = 8.25%, ROE = 19.8% What are the company’s profit margin and equity multiplier (3 points)

1. NTC company has an EM of 3.4 and JET Inc. has an EM of 2.5. Find the liabilities/assets ratio of the two companies, which company has a higher level of financial leverage (3 points).