Pg. 113

  1. How should Phil organize his new venture? In developing your answer, consider such factors as amount of equity capital needed, business liability, and taxation of the venture.
  2. Phil is concerned about trying to protect the intellectual property embedded in his Pedal Pusher product idea and prototype. How might Phil consider protecting his intellectual property?

Pg. 181-182

8. [Cash Conversion Cycle] Castillo Products Company, described in Problem 7, improved its operations from a net loss in 2009 to a net profit in 2010. While the founders, Cindy and Rob Castillo, are happy about these developments, they are concerned about how long the firm took to complete its cash conversion cycle in 2010. Use the financial statements

from Problem 7 to make your calculations. Balance sheet items should reflect the averages of the 2009 and 2010 accounts.

  • Calculate the inventory-to-sale conversion period for 2005.
  • Calculate the sale-to-cash conversion period for 2005.
  • Calculate the purchase-to-payment conversion period for 2005.
  • Determine the length of the Castillo Company’s cash conversion cycle for 2005.
  • 9. Use the financial statement data for Castillo Products presented in Problem 7.

Calculate the net profit margin in 2004 and 2005 and the sales-to-total-assets ratio using yearend data for each of the two years.

Use your calculations from Part A to determine the rate of return on assets in each of the two years for the C&B Castillo Company.

Calculate the percentage growth in net sales from 2004 to 2005. Compare this with the percentage change in total assets for the same period.

Express each expense item as a percentage of net sales for both 2004 and 2005. Describe what happened that allowed the C&B Castillo Company to move from a loss to a profit between the two years.