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Unit 2 Assignment

Charlesa Silmon
Purdue Global University
GB550-01: Financial Management
Professor Sinan Yildirim
February 26, 2024
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1. Complete problem: Total Net Operating Capital

o XYZ, Inc. reported $20 million in operating current assets, $25 million in net
fixed assets, and $6 million in operating current liabilities. How much total net
operating capital does XYZ, Inc. have.
1. Net Working Capital=Current Assets-Current Liabilities
1. 14,000,000=20,000,000-6,000,000
2. Total Net Operating Capital = Net Operating Working Capital + Non-current
Operating Assets
1. 14,000,000 + 25,000,000=39,000,000
2. Complete problem: Balance Sheet Analysis
Total assets turnover: 1.5

Gross profit margin on sales: (Sales – Cost of goods sold)/Sales: 25%

Total liabilities-to-assets ratio: 40%

Quick ratio: 0.80

Days sales outstanding (based on 365-day year): 36.5 days.

Inventory turnover ratio: 3.75

Partial Income Statement Information

Sales $600,000

COGS $450,000

Balance Sheet

Assets

Cash $28,000

Accounts Receivable $60,000

Inventories $120,000

Current assets total $208,000

Long Term Assets

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Fixed assets 192,000

TOTAL ASSETS $400,000

Liabilities-Current

Accounts Payable $110,000

Total current liabilities $110,000

Liabilities-Long

Long-Term Liabilities $50,000

Total liabilities $160,000

Stockholders’ Equity

Common Stock $100,000

Retained Earnings $100,000

Liability and equity=400,000

Formulas Used

 Sales
o Turnover * Assets= 1.5*400,000=600,000
 COGS
o Starting inventory + purchases − ending inventory = cost of goods sold
 600,000-150,000=450,000
 Total Equity
o Equity is equal to total assets minus its total liabilities.
 400,000-160,000=240,000
 Cash
 (110,000 * .8)-60,000=28,000
o total assets = total liabilities + total equity
 400,000=160,000-240,000
 Fixed Asset
o 400,000-(28,000 +60,000+120,000) =192,000
 Inventory
o cost of goods sold by the average inventory balance.
 450,000/3.75=120,000
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 Accounts Receivable
o DSO = Accounts Receivables / Net Credit Sales X Number of Days
 (600,000*36.5)/365=60,000
 Accounts Payable
o Total assets * total liabilities ratio-long term debt
 (400,000 * .40)-50,000=110,000

3. In the provided scenario, you address the time value of money also known as discounted
cash flow analysis. This type of analysis is crucial to being able to viably analyze
financial statements.

The start-up firm you founded is trying to save $10,000 in order to buy a parcel of land
for a proposed small warehouse expansion. In order to do so, your finance manager is
authorized to make deposits of $1250 per year into the company account that is paying
12% annual interest. The last deposit will be less than $1250 if less is needed to reach
$10,000.

o How many years will it take to reach the $10,000 goal and how large will the last
deposit be?
1. FV = PV× (1 + i) n
1. 10,000=1250 * (1.12) ^n
1. 10,000=1,400^n
2. 10000/1400=7.14 years leaving $200 needing to be
deposited in year 7 as $9,800 will be deposited