Solution
Riddhi answered on
Nov 06 2021
Problem 13-1
Answer to Problem 13-1
Particulars M (in millions) N (in millions)
Sales $1,080 $1,215
Net Income 54 122
Investment 180 405
Profit Margin (%) 5% 10%
Investment Turnover(times) 0.30 0.30
Based on the above data it is more preferable to invest in N since the profit margin is higher in N. The basis of decision making cannot be investment turnover as it same for both the companies
Working 1 - Profit Margin
Profit margin Net Income
Net sales revenue
Particulars M (in millions) N (in millions)
Profit margin 54 122
1080 1215
Profit margin 5% 10%
Working 2 - Investment Turnove
Investment turnover Sales revenue
Investment
Particulars M (in millions) N (in millions)
Investment Turnover 54 122
180 405
Investment Turnover 0.30 0.30
Problem 13-3
Answer to Problem 13-3
Particulars Cu
ent year Preceding yea
Cash on hand 5,479,296 6,123,704
Cash expenses 83,138,408 99,748,943
Days Cash 24 days 22 days
The number of days of cash maintained in preceding year was 22 days however in the cu
ent year the cash balance is maintained for 24days. So, it appears that controller has done an effective job in managing cash.
Days Cash Cash
Cash expenses /365
Days Cash - Cu
ent year 5,479,296
8,31,38,408/365
Days Cash - Cu
ent year 24 days
Days Cash - Preceding year 6,123,704
9,97,48,943/365
Days Cash - Preceding year 22 days
Problem 13-4
Answer to Problem 13-4
Particulars Cu
ent year Preceding yea
Accounts receivable 1,392,790 1,207,393
Credit sales 13,035,085 11,597,327
Days receivables (or collection period) 39 days 38 days
The new credit policy on collection with customers had no positive impact on the receivables rather the credit period has extended in the cu
ent. So, the new credit policy had a negative impact.
Days receivables (or collection period) Accounts receivable
Sales/365
Days receivables (or collection...