Assessment Instrument: Assignment 1

This instrument assesses the following Course Learning Outcomes (CLO):
CLOs:
Question # covered in
Assessment*

Course Learning Outcomes (CLO)

1. Examine firms” financial performance using ratios
2. Examine TVM principles

Student
score

Q 1, 2 and 3
Q4&5

Students Name:
Students ID No:

Marks:

Maximum(marks) 20. This constitutes 20% of the total course grade.

For full marks in each question, you have to show your detail works. Late submission of assignment will be
penalized by 10% a day.

Problem 1:
a. Prepare a balance sheet and income statement for Carlos Inc. from the following information:
Inventory
Common stock
Cash
Operating expenses
Short-term notes payable
Interest expense
Depreciation expense
Sales
Accounts receivable
Accounts payable
Long-term debt
Cost of goods sold
Building and equipment
Accumulated depreciation
Taxes
General and administrative expenses
Retained earnings

6,500
45,000
16,550
1,350
600
900
500
12,800
9,600
4,800
55,000
5,750
122,000
34,000
1,440
850
?

b. Calculate the current ratio, quick ratio and operating profit margin.

Problem 2:
3M had a gross profit margin of (gross profit/Sales) of 30% and sales of $9 million last year. 75% of the
company sales are on credit and the remainder are cash sales. 3M”s current assets equal $1.5 million, its
current liabilities equal $300,000, and it has $100,000 in cash plus marketable securities.
a. If 3M”s accounts receivable are $562,500, what is its average collection period?
b. If 3M reduces its days in receivable (average collection period) to 20 days, what will be its new level of
accounts receivable?
c. 3M”s inventory turnover ratio is 9 times. What is the level of 3M”s inventories.

Problem 3:
Hattaway Inc. has total assets of $63 million and total debt of $42 million. The company also has
operating profits of $21 million with interest expenses of $6 million.
a. What is Hattaway debt ratio?
b. What is its times interest earned?

Problem 4:
You would like to buy your first home in 5 years and you are saving towards your down payment which
you estimate at AED 100,000.
How much do you need to invest today to get AED 100,000 in 5 years, if the annual interest rate if 10% ?

Problem 5:
The gross sales of your company this year were estimated at AED 2.3 million. Your marketing and sales
teams are working towards increasing these sales at 5% a year for the next 5 years. What will be the
level of sales of your company five years from now at this rate?