Finance

Question 1

Implied Interest Rate Calculation

Answer 1

Negative PV, PMTS, N = rate (use FV as 0)

If payments are other than annually adjusted to annual rate

Question 2

Current ratio

Answer 2

(Current assets/Current liabilities)

Question 3

Quick ratio

Answer 3

o (Current assets EXCLUDING inventory)/(Current liabilities)

Question 4

AR turnover ratio

Answer 4

(Credit sales/average AR)

Question 5

Days in receivable ratio

Answer 5

(days in year/AR turnover ratio)

Question 6

AP turnover ratio

Answer 6

(purchases/ Average AP)

Question 7

Days in payable ratio

Answer 7

(days in year/AP turnover ratio)

Question 8

Inventory turnover ratio

Answer 8

(COGS/Average inventory)

Question 9

Days in Inventory ratio

Answer 9

(days in year/ Inventory turnover ratio)

Question 10

Cashflow & Working Capital Fixes

Answer 10

Receivables - Changing timing of collections from vendors
Receivables - Offer discounted fees for early payment from customers
Inventory - avoid excess inventory purchases, & operate using a just-in-time basis by having suppliers make smaller shipments
Cash - Reduce large cash balances on hand, reinvestment into investments or entity
Payables - Dont make early repayments towards invoices if not stated, taking advantage of the full payment term from vendors