Question

Hyrkas Corporation's most recent balance sheet and income statement appear below Balance Sheet December 31, Year...

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.)

Homework Answers

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%

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