Finance question – treasury management

Provide detailed step by step solution explaining in words on how you get to the answers.  The answers are provided to you and highlighted, however you have to explain step by step on how you get to the answers.  Provide any internet resources that you use as properly referenced material.

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3.1. The following information is available about Marne Company for 2010. All sales are on credit.




Average cash and marketable securities = $1 million


EBIT = $2 million


Average inventory = $5 million


COGS = $15 million


Average accounts payable = $3 million


Long-term bonds = $8 million


Average accounts receivable = $3 million


Coupon rate on bonds = 10%




Total Sales = $20 million




Find its:


(A) Inventory turnover ratio, 3.00


(B) Number of days sales outstanding, 54.75 days


(C) Interest coverage ratio, 2.50


(D) Current ratio, 3.00


(E) Quick ratio, 1.333




3.2. Ider Corp expects to have $3.73 as earnings per share next year. The cost of equity for Ider is 16%, whereas its dividend yield is 4%. The price per share of Ider is $40. Find its dividend payout ratio. Find its current P/E ratio.


DPR = 42.9%, P/E = 12.01




3.3. Indicate whether the following actions will increase, decrease, or make no change in the cash position of Neva Company. Give a short explanation in each case.




1. The firm collects payments from previous sales.


2. The company buys a piece of machinery by using long-term debt.


3. The company buys raw material for inventory on credit.


4. The company issues common stock.


5. The firm sells merchandise on credit.


6. The company declares a dividend.


7. The company purchases raw materials for inventory and pays in cash.


8. The firm pays interest on long-term debt.


9. This year’s tax liability is increased.


10. The firm pays last year’s taxes.


11. The firm uses retained earnings to buy marketable securities.


12. The corporation buys a piece of furniture using a short-term note.


13. The company increases the allowance for bad debts.


14. The company buys back its own stock.


15. The firm borrows on a short-term note.


16. The company pays for a previous purchase.


17. The company sells some merchandise for cash.


18. The firm increases the accumulated depreciation.


19. The firm gives away some merchandise to charity.


20. The firm receives an insurance payment after a fire loss.




3.4. Go to the Internet and find the following ratios for McDonald Corporation (MCD). Give the source of your information.



























Quick, or Acid Test







Asset Management








Inventory Turnover







Days sales outstanding







Fixed assets turnover







Total assets turnover







Debt Management








Debt ratio







Interest coverage












Net profit margin







Net return on assets







Return on common equity







Dividend payout ratio







Market Value





P-E ratio














Dividend yield