BEC #9

Scroll down to complete all parts of this task. The board of directors for Hedrick Company has finished its review of the September financial statements and the related financial metrics. The board's comments are the subject of an email from Tyler Shaw, CFO, to George Nelson, CEO. To revise the email, click on each segment of underlined text below and select the needed correction, if any, from the list provided. If the underlined text is already correct in the context of the email, select [Original Text] from the list. To: George Nelson, CEOFrom: Tyler Shaw, CFORe: Performance metrics George, As requested, I have reviewed our most recent financial statements. For September Year 2, the company's quick ratio is 1.07. Hedrick Company should be able to pay its current liabilities easily if we can keep the quick ratio above 1. For the same time period, the current ratio for Hedrick Company is 1.55. Current ratio is an indication of the company's liquidity and measures its ability to cover its short-term liabilities with its current assets. The board has directed us to improve or maintain our liquidity in quarter 4 by meeting its requirements for the quick and current ratios. A quick way to increase the company's quick ratio would be to purchase inventory on account. However, this will have no effect on the current ratio. Other ideas to increase both the company's quick ratio and current ratio to meet the board's requirements include the following: Write off $1,500 of obsolete inventory Take out a new $20,000 long-term note for purchase of new equipment Lastly, increasing sales profitability through higher prices or lower costs will also increase these ratios. I have scheduled an hour-long meeting for Thursday at 10:30 a.m. in the Maxwell conference room so we can discuss this matter further. Thank you,Tyler Shaw, CFO

1. 1.19 2. 1.68 3. sell old inventory at cost 4. [Original Text] However, this will have no effect on the current ratio 5. Sell unproductive and unused equipment for $5,500 cash. 6. Pay off $7,000 of the current liabilities with cash.

Calculate the items below based on Aaron Co.'s financial statements. The information in the Analytics Definitions exhibit must be used for any financial metric calculations. Enter the appropriate amounts in the associated cells, round all amounts to the nearest hundredth, and assume that the fiscal year has 365 days. ItemAmount1. Current ratio2. Quick ratio3. Net working capital4. Accounts receivable turnover5. Average collection period

1. 2.78 2. 1.91 3. 490000 4. 29.47 5. 11.56

Using the information provided in the exhibits, calculate the correct amounts and enter your responses in the associated cells. Round all amounts to the nearest hundredth. If no entry is necessary, enter a zero (0) or leave the cell blank. Then, select from the option list provided the correct segment. Each choice may be used once, more than once, or not at all. QuestionAmountSegment1. Which segment has the highest current ratio, and what is it?2. Which segment has the highest quick ratio, and what is it?3. Which segment has the highest working capital as a percentage of revenue, and what is it?4. Which segment meets the industry standard for current ratio liquidity, but fails to measure up to the board's requirements? What is this segment's current ratio?5. Which segment has the board decided to close and what is its current ratio? Select from the option list provided the segment that meets all the board's criteria. QuestionAnswer6. Which segment meets all the board's criteria for (a) current ratio, (b) quick ratio, (c) gross profit margin, and (d) working capital as a percentage of revenue?

1. 3.07, Camping 2. 2.27, Fishing 3. 44.24, Climbing 4. 1.65, Hiking 5. 0.64. Caving 6. Camping

Using the information provided in the exhibits, enter the appropriate amounts in the associated cells to indicate how each item in the left column affects Johnson's Shop's working capital. If the item increases working capital, enter the amount as a positive number. If the item reduces working capital, enter the amount as a negative number using a leading minus (-) sign. Item affecting working capitalEffect on the amount of working capital1. Earnings before interest, taxes, depreciation, and amortization (EBITDA)2. Acquisition of fixed assets3. Withdrawals4. Deposits from personal funds5. Receiving long-term loan6. Acquiring a 9-month bank loan7. Paying long-term debt8. Purchase of inventory

1. 5500 2. -23500 3. -5000 4. 60000 5. 40000 6. 0 7. -5000 8. 0

Using the information provided in the exhibits, select from the option list provided the best answer for each question. Each choice may be used once, more than once, or not at all. QuestionAnswer1. What type of financing policy does financing option A represent?2. What type of financing policy does financing option B represent?3. What type of financing policy does financing option C represent?4. What is item (a) on the graph representing financing option C?5. What is item (b) on the graph representing financing option C?6. What is item (c) on the graph representing financing option C?7. What is item (d) on the graph representing financing option C?

1. Conservative financing policy 2. Aggressive financing policy 3. Maturity matching 4. Property, plant and equipment 5. permanent current assets 6. Long-term financing 7. short-term financing

Scroll down to complete all parts of this task. Use the information provided in the exhibits to answer the following questions regarding Aaron, Inc. For each option, select from the option list provided the correct type of policy. Each choice may be used once. OptionType of policy1. Option 12. Option 23. Option 3 For each type of capital, enter the appropriate amount in the designated cell to indicate the correct amount of capital in Year 8. Capital typeAmount4. Temporary Working Capital for Year 85. Permanent Working Capital for Year 8 For each fund type, select from the option list provided the correct financing type. Each choice may be used once, more than once, or not at all. FundType of financing6. Mortgage bonds7. Debentures8. Preferred stock9. Term loan10. Common stock11. Commercial paper12. Retained earnings13. Trade credit

1. Conservative policy 2. Aggressive policy 3. Moderate policy 4. 15,000,000 5. 55,000,000 6. Long-term financing 7. Long-term financing 8. Long-term financing 9. short-term financing 10. Long-term financing 11. short-term financing 12. Long-term financing 13. Spontaneous financing

Scroll down to complete all parts of this task. You are the staff accountant of Aaron Co. Please review the documents and revise the email below, correcting any errors. To revise the document, click on each segment of underlined text below and select the needed correction, if any, from the list provided. If the underlined text is already correct in the context of the document, select [Original Text] from the list. If removal of the underlined text is the best revision to the document, select [Delete Text] from the list if available. To: Katie Pearson, Accounting ManagerFrom: Jim Strong, Staff AccountantRE: New plan's effect on liquidity ratioDate: January 4, Year 7 Good morning Katie, I have reviewed the financial statements. Please see my analysis of the three options below. If we implement Option 1, the current ratio and the quick ratio will increase. Accounts receivable, accounts payable, and cash will increase. If we implement Option 1, working capital will remain the same because the increase in cash is offset by the decrease in accounts receivable and the increase in accounts payable. If Option 2 is implemented, the current ratio and quick ratio will decrease. Option 2, which causes equal changes in current assets and current liabilities, has a proportionally smaller effect on current assets. The increase in cash is offset by the decrease in accounts receivable. Also, if Option 2 is implemented, working capital will increase. Accounts payable and cash will increase. If Option 3 is implemented, the quick ratio and working capital will increase. Accounts receivable and cash will increase. Under all three options, the average collection period will decrease. Please let me know if you have any questions. Jim

1. and the quick ratio will decrease. Option 1, which causes equal changes in current assets and current liabilities, has a proportionally greater effect on current liabilities. 2. Original Text] remain the same because the increase in cash is offset by the decrease in accounts receivable and the increase in accounts payable. 3. increase. The establishment of a zero-balance account increases current assets. 4. increase. Current assets will increase. 5. and working capital will remain the same. Current assets will remain the same. 6. Options 1 and 3, the average collection period will decrease

Scroll down to complete all parts of this task. Use the information provided in the exhibits above to calculate the requested items in column A for each of the companies in columns B, C, and D. Enter the appropriate amounts in the designated cells below. Round all amounts to the nearest hundredth. Enter all amounts as positive values. For rows 3 and 6, select from the option list provided the effect on the ratio for each company. ABCD1ItemCompany ACompany BCompany C2Current ratio3What effect will purchasing $100,000 of inventory on account have on the current ratio?4New current ratio5Quick ratio (prior to inventory purchase)6What effect will using 50% of the cash balance to pay down accounts payable have on the quick ratio?7New quick ratio

B2, C2, D2. 0.89; 2.74; 1.00. B3, C3, D3. Increase; Decrease; No effect B4, C4, D4. 0.92; 2.00; 1.00. B5, C5, D5. 0.33; 1.79; 1.00. B6, C6, D6. Decrease; Increase; No effect B7, C7, D7. 0.28; 2.72; 1.00.

Use the information provided in the exhibits above to calculate the requested items in column A for each of the years in columns B, C, and D. Enter the appropriate amounts in the designated cells below. Round all amounts to the nearest hundredth. Enter all amounts as positive values. Assume that the fiscal year has 365 days. ABCD1ItemYear 3Year 2Year 12Current ratio1.533Average accounts receivable balance$1,316,000.00$1,169,000.004Quick ratio0.415Accounts receivable turnover ratio6.856Credit sales balance$8,066,100.00$7,884,000.007Days' sales in receivables50.00

B2, C2. 1.28, 1.00 D3. 1,080,000 B4, D4. 0.55, 0.6 C5, D5. 6.90, 7.3 B6. 9,014,600 B7, C7. 55.63, 56.93

Scroll down to complete all parts of this task. Birch Corp. is a floral retailer and distributor in the United States. The company is interested in improving its working capital position during Year 5. Task 1: Toward the end of Year 4, the company's finance manager was asked to determine a reasonable level of cash that the company should borrow and maintain to meet working capital requirements. The finance manager asked you to review Birch's options, set forth in the working capital alternatives memo, to determine the impact of each strategy on elements of the company's net working capital. Review the company's working capital alternatives memo and its accounts receivable aging schedule in the exhibits above and determine the impact of each strategy on elements of net working capital. For each of the strategies listed in column A of the table below, click in the associated cell in column B and select the answer that best describes the impact that the strategy listed would have on the elements of net working capital as of December 31, Year 4. Assume that execution of each of the strategies listed would take place on December 31, Year 4. AB1StrategyImpact on elements of Net Working Capital as of December 31, Year 42Term loan - option one3Term loan - option two4Line of credit5Factoring agreement6Sale of delivery trucks Task 2: At the end of Year 5, Birch had shareholders' equity in the amount of $10,380,000. The company's long-term liabilities were $7,500,000, with net working capital, excluding accounts receivable, of $2,105,000. Birch's noncurrent assets had a carrying value of $15,190,000. What was Birch's accounts receivable balance at the end of Year 5? For the line item listed below in column A, enter the applicable amount, rounded to the nearest whole number, in the associated cell in column B. If an amount is zero, enter a zero (0). AB1Line itemAmount2Accounts receivable

B2. Current assets will increase by $240,000, and current liabilities will increase by $120,000. B3. Current assets will increase by $240,000, with no change to the current liabilities. B4. Current assets will increase by $120,000, and current liabilities will increase by $120,000 B5. Current assets will decrease by $40,000, with no change to the current liabilities. B6. Current assets will increase by $100,000, with no change to the current liabilities. B2. $585,000.