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zacharie101 · Sep 17, 2012, 12:07 PM

Can you please help me start my homework.

1. A firm has 1.5 million shares outstanding. EBIT is $5 million and interest paid is $2 million. If the corporate tax rate is 35%, what is EPS?

2. If the average collection period is 73 days and sales are $50,000, what are the accounts receivable?

I have already did number 1 and got EPS= 1.3 but how would I do number 2? You don't have to give me the answer just tell me the steps to take. I got 10,000 (sales of 50,000/5=10,000 365/73=5)

3. If the current ratio is 2.5 and the quick ratio is 1.8 and current liabilities are $300,000, how much is Inventory?

How would I calculate this one, I don't need the answer I just don't know how to start the problem

ArcSine · Sep 18, 2012, 04:34 AM

Answering (2) requires a clarification on the sales number: Is that 50K per day? Per year? Per..

To get started on (3), let C denote total current assets, and let I denote inventory.

The furnished information then gives you two equations:

$\frac{C}{300,000} \ = \ 2.5$ and

$\frac{C - I}{300,000} \ = \ 1.8$

You can then solve for I.

zacharie101 · Sep 18, 2012, 10:11 AM

Originally Posted by ArcSine

Answering (2) requires a clarification on the sales number: Is that 50K per day? per year? per ...?

To get started on (3), let C denote total current assets, and let I denote inventory.

The furnished information then gives you two equations:

$\frac{C}{300,000} \ = \ 2.5$ and

$\frac{C - I}{300,000} \ = \ 1.8$

You can then solve for I.

2. Im guessing its per year, I copied the problem word for word

3. I found inventory = 210,000 is that right?

zacharie101 · Sep 18, 2012, 10:33 AM

Originally Posted by ArcSine

Answering (2) requires a clarification on the sales number: Is that 50K per day? per year? per ...?

To get started on (3), let C denote total current assets, and let I denote inventory.

The furnished information then gives you two equations:

$\frac{C}{300,000} \ = \ 2.5$ and

$\frac{C - I}{300,000} \ = \ 1.8$

You can then solve for I.

If you get a chance can u please help me with this other question, that is if you understand how to calculate the problem

https://www.askmehelpdesk.com/finance-accounting/how-calculate-operating-cash-flow-701997.html

ArcSine · Sep 18, 2012, 12:17 PM

2. Yep, if annual sales are 50,000 and 73 days' worth of sales are tied up in receivables, then AR is 10,000.

50,000 / 365 = 136.986301 sales per day, on average.
136.986301 * 73 = 10,000 total AR.

3. Inventory = 210K, you got it.