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For Questions 8 through 10, use the information provided below concerning Allied Business Solutions, Inc. (ABS) in fiscal year (FY) 2050 and FY 2051.

ABS Inc., balance sheets:

	FYE 2051	FYE 2050
Current assets:
Cash	17,631	14,588
Accounts receivable	41,019	35,258
Inventory	71,505	65,567
Net plant and equipment	498,421	477,413
Total assets	$628,576	$592,826
Current liabilities:
Accounts payable	63,073	55,653
Notes payable	25,324	21,895
Long-term debt	62,000	58,000
Common stock and paid-in surplus	60,000	60,000
Accumulated retained earnings	418,179	397,278
Total liabilities and owners equity	628,576	$592,826

ABS Inc., incomes statement:

	FY 2051
Sales revenues Cost of goods sold SG&A EBIT Interest expenses Net income	730,200 495,000 85,000 150,200 42,000 86,560

ABS Inc., the share information at the end of fiscal year (FYE) 2051:

The number of shares outstanding: 200,000 shares

Price per share: $10

Question 8

Determine the following financial ratios for ABS Inc. in FY 2051: i) NWC ratio, ii) total debt to assets ratio, iii) debt-to-equity ratio, and iv) interest coverage ratio (based on EBIT), rounded to four decimal places (e.g., 0.78715= 0.7872).

Question 9

For FY 2051, (i) calculate ABS Inc.s return on equity (ROE). Additionally, (ii) decompose ROE into three pieces of information (i.e., DuPont analysis). Provide all numbers in four decimal places (e.g., 0.78715= 0.7872).

Question 10 [5 marks]

Which of the following statements is correct? Choose only one.

A) Relative to market to book ratio, Tobins Q is more difficult to construct because it requires the estimate of the historical costs of the firms assets.

B) ABS Inc.s inventory turnover ratio for FY 2051 (based on FYE balance, not FY average) is 71,505/495,000=0.144.

C) ABS Inc.s price to earnings (P/E) at FYE 2051 is 0.4328/10=0.04328.

D) The DuPont analysis suggests that compared with its ROA, ABS Inc.s ROE is lowered by its financial leverage.

E) None of the above

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