Expert answer:Read and understand the file, watch the videos and

Expert answer:Read and understand the file that I attached here. Answer question 5 and 6 in this file base on what you understand about it and from watching this video.Watch this video:
homework_3_finance.docx

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(2) Deductive reasoning skill: Deductive reasoning is a logical process in which a conclusion is
based on the concordance of multiple premises that are generally assumed to be true. Please
watch the video clip provided on Deductive Reasoning
Do the following problems (Q1 – Q5) and then, answer the last question (Q6) using the deductive
reasoning skill.
1. Calculate current ratio and acid test ratio for the firm.
Current ratio: current asset/current liabilities=28,500/31,350=0.9
Acid test ratio for the firm (quick ratio): (current assets-inventories)/current liabilities=
(28,500-8,700)/31,350= 0.632
2. Calculate DSO, fixed assets turnover, and total asset turnover for the firm.
DSO: Receivables/(Annual sales/365)=17,800/(200,000/365)=32,485
Fixed assets turnover: Sale/Net fixed assets= 200,000/43,500=4.6
Total asset turnover: Sale/Total assets= 200,000/72,000= 2.7
3. Calculate liabilities-to-assets ratio and times-interest-earned ratio for the firm.
Liabilities-to-assets ratio: Total liabilities/Total assets= 39,600/72,000= 0.55
Times interest earned ratio(TIE): EBIT/Interest payments= 4,000/1,000=4
4. Calculate net profit margin and return on equity for the firm.
Profit margin: Net Income/Sales= 1,950/200,000= 0.00975
ROE: Net Income/Total common equity= 1,950/32,400= 0.0602
5. Evaluate the performance of the firm in the following areas: Liquidity management
Asset management Debt management Profitability management When you
explain the firm’s strength or weakness in each area, you must support your
arguments through the evaluative reasoning process by providing reasons, methods,
criteria, or assumptions behind the claims made.
6. Deductive reasoning starts with a general principle and deduces that it applies to a
specific case. Deductive reasoning moves with exacting precision from the assumed
truth of a set of premises to a conclusion which cannot be false if those premises are
true. Explain the deductive reasoning process applied to analyze the firm’s
performance.
…
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