# Finance: Ratios, inventory turnover, cash on hand, TVM, zero

QPAC Computer has net working capital of $1,000; current liabilities of $8,000;

and inventory of $1,500.

a. What is the current ratio?

b. What is the quick ratio?

Alberto Corporation has ending inventory of $750,000, and cost of goods sold for the year just ended was $2,950,000.

a. What is the inventory turnover?

b. What is the Average Age of Inventory (also sometimes called the Days' sales in inventory)?

c. On average, how long did a unit of inventory sit on the shelf before it was sold?

Why would stockholders and creditors most likely disagree on how much cash a firm should keep on hand?

As a licensed Financial Planner, you are meeting with a client to discuss investment options. Your client is reviewing two alternatives. He can either deposit $10,000 into an account paying 9% annual interest either today or exactly 10 years from today.

How much better off financially will he be at the end of 40 years if he chooses to make the initial deposit today rather than waiting 10 years to make the initial deposit (you can ignore inflation)?

A Wisconsin state savings bond can be converted to $100 at maturity 6 years from purchase. If the state bonds are to be competitive with U.S. savings bonds, which pay 8% annual interest (compounded annually), at what maximum price can the state price its bonds? Assume no cash payments on savings bonds prior to redemption.

Dexter Corporation is considering establishment of a zero-balance account. The firm currently maintains an average balance of $420,000 in its disbursement account. As compensation to the bank for maintaining the zero-balance account, the firm will have to pay a monthly fee of $1,000 and maintain a $300,000 non-interest-earning deposit in the bank. The firm currently has no other deposits in the bank.

Evaluate the zero-balance account proposal, and make a recommendation to the firm, assuming that it has a 12% opportunity cost.

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#### Solution Summary

Your tutorial guides you through these time value of money exercises in Excel (attached). Click in cells to see computations.