1. The person in charge of the finances of the company MGT, S.A. wants to know the company's situation concerning the industrial sector to which it belongs. For this, it has the following information regarding the industry: General liquidity ratio is 1.55; the acid test is 1.20, and the ratio between the available and the current liabilities is 0.95. The debt ratio stands at 1.25. The margin on sales is 21%. The investment rotation is 1.45 times. Economic profitability is around 23%, and financial profitability is 29% The data referred to the company (in thousands of €) are the following: Assets Liability and Net Equity Non-current asset (net) 170 Equity 125 Stocks of finished products 45 Reservations 25 Clients 65 External Resources 105 Banks 70 Loans 65 Supplier 30 Total Assets 350 Total Net Equity 350 In addition, it is known that: Sales are € 250,000 and its direct cost of € 105,000. Amortization of € 70,000. Long-term debt generates interest at 5%, short-term bank loans at 7%, and the departure of suppliers does not accrue any interest. The Corporation Tax is 25%. Calculate the liquidity, acid test and debt ratios, and compare them with the sector data. It also calculates the economic and financial returns, and the margin on sales and investment rotation, even making a comparison between the company and sector.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 10P

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1. The person in charge of the finances of the company MGT, S.A. wants to know the company's situation concerning the industrial sector to which it belongs. For this, it has the following information regarding the industry:

General liquidity ratio is 1.55; the acid test is 1.20, and the ratio between the available and the current liabilities is 0.95.
The debt ratio stands at 1.25. The margin on sales is 21%. The investment rotation is 1.45 times.
Economic profitability is around 23%, and financial profitability is 29%

The data referred to the company (in thousands of €) are the following:

Assets	Liability and Net Equity
Non-current asset (net)	170	Equity	125
Stocks of finished products	45	Reservations	25
Clients	65	External Resources	105
Banks	70	Loans	65
		Supplier	30
Total Assets	350	Total Net Equity	350

In addition, it is known that:

Sales are € 250,000 and its direct cost of € 105,000.
Amortization of € 70,000.
Long-term debt generates interest at 5%, short-term bank loans at 7%, and the departure of suppliers does not accrue any interest.
The Corporation Tax is 25%.

Calculate the liquidity, acid test and debt ratios, and compare them with the sector data. It also calculates the economic and financial returns, and the margin on sales and investment rotation, even making a comparison between the company and sector.

2. We know the following data of the company Perfilados, S.A:

It bought and consumed € 105,000 in raw materials for the manufacture of its product and, on average, maintained a stock level of them in the stock of € 9,250. Calculate the average storage period.

Calculate the average storage period.

The cost of its annual production is € 198,000, and the average value of the products under development is € 11,000. Calculate the average manufacturing period.
Taking into account that the company exclusively sold all its annual production and that the average value of its stock in finished goods warehouse was € 18,500, it calculates its average sales period.
Assuming that the company sold its products for an amount of € 290,000 and that the customers had on average a debt with the company of € 17,000, it calculates the average collection period.
With the data obtained in the previous points, it calculates the average period of economic maturity of Perfilados, S.A.

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