Case Solutions for Corporate Finance Ross, Westerfield, and Jaffe 9th Edition

25037 words 101 pages
Case Solutions

Corporate Finance

Ross, Westerfield, and Jaffe
9th edition

CHAPTER 2
CASH FLOWS AT WARF COMPUTERS

The operating cash flow for the company is: (NOTE: All numbers are in thousands of dollars)

OCF = EBIT + Depreciation – Current taxes OCF = $1,332 + 159 – 386 OCF = $1,105

To calculate the cash flow from assets, we need to find the capital spending and change in net working capital. The capital spending for the year was:

| |Capital spending | |
| |Ending net fixed assets |$2,280 |
| |– Beginning net fixed assets |1,792 |
| |+ Depreciation
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The company was able to return a significant amount of cash to its shareholders during the year, but a better use of these cash flows may have been to retain them for the expansion. This decision will be discussed in more detail later in the book.

CHAPTER 3
RATIOS AND FINANCIAL PLANNING AT EAST COAST YACHTS

1. The calculations for the ratios listed are:

Current ratio = $14,651,000 / $19,539,000 Current ratio = 0.75 times

Quick ratio = ($14,651,000 – 6,136,000) / $19,539,000 Quick ratio = 0.44 times

Total asset turnover = $167,310,000 / $108,615,000 Total asset turnover = 1.54 times

Inventory turnover = $117,910,000 / $6,136,000 Inventory turnover = 19.22 times

Receivables turnover = $167,310,000 / $5,473,000 Receivables turnover = 30.57 times

Total debt ratio = ($108,615,000 – 55,341,000) / $108,615,000 Total debt ratio = 0.49 times

Debt-equity ratio = ($19,539,000 + 33,735,000) / $55,341,000 Debt-equity ratio = 0.96 times

Equity multiplier = $108,615,000 / $55,341,000 Equity multiplier = 1.96 times

Interest coverage = $23,946,000 / $3,009,000 Interest coverage = 7.96 times

Profit margin = $12,562,200 / $167,310,000 Profit margin = 7.51%

Return on assets = $12,562,200 / $108,615,000 Return on assets = 11.57%

Return on equity = $12,562,000 /

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