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# ACC00724 Accounting For Managers

## Questions:

Dividends declared in 2006 were 8 cents per share and in 2007 10.5 cents per share.Calculate the Current ratio and the Quick ratio for 2007. Comment on the liquidity of this company.

For comparison purposes, other firms in this industry sector have an average Current ratio of 1.76 and an average Quick ratio of 0.78.

1. From the information provided about dividends and earnings and from the Cash flow statement and Balance sheet, comment on long term and short sources of finance that Super Cheap Auto has used to expand the business from 2006 to 2007.
2. Calculate a ratio that will tell you how many times a year Super Cheap Auto turns over its inventory in 2007 (or, calculate the ratio that tells you the number of days it takes to turn over inventory). Comment on this aspect of working capital management.
3. Do you think Super Cheap should borrow more money to expand faster Why Explain you reasoning.
4. Assuming a share price of \$4.50, calculate a Price Earnings (PE) ratio and a Dividend Yield ratio for Super Cheap Auto. Interpret these ratios and comment on the value of shares in Super Cheap Auto, given that sector average PE is 16.7 and sector average dividend yield is 3.7%. What does this tell us about the market’s expectations about growth in Super Cheap Autos share price.
5. a) List 4 different types (groups) of people who are users of general purpose financial statements.
1. b) Select 2 different groups from your list in part a) then compare and contrast their financial information needs. Discuss the benefitsthey would gain by reading and analyzing the financial statements. What limitationsmight each group find with this source of information.

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