Question

Hyrkas Corporation's most recent balance sheet and income statement appear below

Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
	Year 2			Year 1
Assets
Current assets:
Cash	$	230		$	350
Accounts receivable, net		380			400
Inventory		350			320
Prepaid expenses		20			20
Total current assets		980			1,090
Plant and equipment, net		1,240			1,380
Total assets	$	2,220		$	2,470
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	320		$	350
Accrued liabilities		50			50
Notes payable, short term		40			40
Total current liabilities		410			440
Bonds payable		310			540
Total liabilities		720			980
Stockholders’ equity:
Common stock, $2 par value		200			200
Additional paid-in capital		330			330
Retained earnings		970			960
Total stockholders’ equity		1,500			1,490
Total liabilities & stockholders’ equity	$	2,220		$	2,470

Income Statement

For the Year Ended December 31, Year 2(in thousands of dollars)

Sales (all on account)$1,580

Cost of goods sold 1,010

Gross margin 570

Selling and administrative expense 495

Net operating income 75

Interest expense 20

Net income before taxes 55

Income taxes (30%) 17

Net income $38

Dividends on common stock during Year 2 totaled $28 thousand. The market price of common stock at the end of Year 2 was $8.10 per share.

Required:

Compute the following for Year 2:

a. Gross margin percentage. (Round your answer to 1 decimal place.)

b. Earnings per share. (Round your answer to 2 decimal places.)

c. Price-earnings ratio. (Do not round intermediate calculations. Round your answer to 1 decimal place.)

d. Dividend payout ratio. (Do not round intermediate calculations. Round your "Percentage" answer to 1 decimal place.)

e. Dividend yield ratio. (Round your "Percentage" answer to 2 decimal places.)

f. Return on total assets. (Do not round intermediate calculations. Round your "Percentage" answer to 2 decimal places.)

g. Return on equity. (Round your "Percentage" answer to 2 decimal places.)

h. Book value per share. (Round your answer to 2 decimal places.)

i. Working capital. (Input your answer in thousands of dollars.)

j. Current ratio. (Round your answer to 2 decimal places.)

k. Acid-test (quick) ratio. (Round your answer to 2 decimal places.)

l. Accounts receivable turnover. (Round your answer to 2 decimal places.)

m. Average collection period. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 1 decimal place.)

n. Inventory turnover. (Round your answer to 2 decimal places.)

o. Average sale period. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 1 decimal place.)

p. Times interest earned ratio. (Round your answer to 2 decimal places.)

q. Debt-to-equity ratio. (Round your answer to 2 decimal places.)

Answer 1

Answer a.

Gross Margin Percentage = Gross Margin / Sales
Gross Margin Percentage = $570 / $1,580
Gross Margin Percentage = 0.361 or 36.1%

Answer b.

Earnings per share = Net Income / Number of shares outstanding
Earnings per share = $38 / 100
Earnings per share = $3.80

Answer c.

Price-earnings Ratio = Market Price per share / Earnings per share
Price-earnings Ratio = $8.10 / $3.80
Price-earnings Ratio = 2.1

Answer d.

Dividend Payout Ratio = Dividend / Net Income
Dividend Payout Ratio = $28 / $38
Dividend Payout Ratio = 0.737 or 73.7%

Answer e.

Dividend per share = Dividends / Number of shares outstanding
Dividend per share = $28 / 100
Dividend per share = $2.80

Dividend Yield Ratio = Dividend per share / Market Price per share
Dividend Yield Ratio = $2.80 / $8.10
Dividend Yield Ratio = 0.346 or 34.6%