Question

Consider Fisher & Company’s financial data as follows (unit: millions of dollars except ratio and time figures):

Cash and marketable securities	$100
Fixed assets	$280
Sales	$1,200
Net income	$358
Inventory	$180
Current ratio	3.2
Average collection periods	45 days
Average common equity	$500

1. Find Fisher’s accounts receivable
2. Calculate the amount of current assets
3. Determine the amount of current liabilities
4. Determine the amount of total assets
5. Calculate the amount of the long-term debt
6. Calculate the net profit margin

Answer 1

A) - Average collection period = (Average Receivables/Net sales)*365

45 = (Average Receivables/$1200 million)*365

Average Receivables = $ 147.9452 million

B) - Current Assets = Average Receivables + Cash and marketable securities + Inventory

= $ 147.9452 million + $100 million + $180 million

= $ 427.9452 million

C)- Current Ratio = Current Assets/Current Liabilities

3.20 = $ 427.9452 million/Current Liabilities

Current Liabilities = $ 133.7329 million

D)- Total Assets = Current Assets + Fixed Assets

= $427.9452 million + $ 280 million

= $ 707.9452 million

E). Total Assets = Total Liabilities & Equities

Total Liabilities & Equities = Current Liabilities + Long Term Debt + Average common Equity

$ 707.9452 million = $ 133.7329 million + Long Term Debt + $ 500 million

Long Term Debt = $ 74.2123 million

F). Net Profit Margin = Net Income/Sales

= $358 m/$1200 m

= 29.83%

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