Muscarella Inc. has the following balance sheet and income ...

[desireelg_7]

Question 1

Lindley Corp.’s stock price at the end of last year was $48.71, and its book value per share was $40.50. What was its market/book ratio?

◦

1.56

◦

1.40

◦

1.31

◦

1.20

Question 2

Muscarella Inc. has the following balance sheet and income statement data:

Cash	$ 15,000	​	Accounts payable	$ 48,000
Receivables	80,000	​	Other current liabilities	32,000
Inventories	230,000	​	Total CL	80,000
Total CA	325,000	​	Long-term debt	90,000
Net fixed assets	155,000	​	Common equity	310,000
Total assets	$480,000	​	Total liab. and equity	$480,000
Sales	$310,000	​	​	​
Net income	$26,000	​	​	​
​	​	​	​	​	​

The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.8, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common shares at book value, by how much would the ROE change?

◦

3.51%

◦

3.80%

◦

4.05%

◦

4.29%

[kyledifference]

A FREE account is required to view all solutions! Click to Register

Login with Facebook Login with Google Login with Email

Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.

Answer Preview

Only 64% of students answer this correctly

[desireelg_7]

Excellent

[essyface1]

Wow, this really help