01 May WHAT WILL BE THE LEVEL OF SALES OF YOUR COMPANY FIVE YEARS FROM NOW AT THIS RATE?
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. 3Ms current assets equal $1.5 million, its
current liabilities equal $300,000, and it has $100,000 in cash plus marketable securities.
a. If 3Ms 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. 3Ms inventory turnover ratio is 9 times. What is the level of 3Ms 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?
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