Question

Balance Sheet December 31, Year 2 and Year 1 (in thousands of dollars) Year 2 Year...

Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2 Year 1
Assets
Current assets:
Cash $ 205 $ 300
Accounts receivable, net 330 350
Inventory 300 270
Prepaid expenses 20 20
Total current assets 855 940
Plant and equipment, net 1,090 1,180
Total assets $ 1,945 $ 2,120
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 270 $ 300
Accrued liabilities 50 50
Notes payable, short term 40 40
Total current liabilities 360 390
Bonds payable 260 410
Total liabilities 620 800
Stockholders’ equity:
Common stock, $2 par value 200 200
Additional paid-in capital 330 330
Retained earnings 795 790
Total stockholders’ equity 1,325 1,320
Total liabilities & stockholders’ equity $ 1,945 $ 2,120
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $ 1,460
Cost of goods sold 920
Gross margin 540
Selling and administrative expense 445
Net operating income 95
Interest expense 20
Net income before taxes 75
Income taxes (30%) 23
Net income $ 52

Dividends on common stock during Year 2 totaled $47 thousand. The market price of common stock at the end of Year 2 was $8.30 per share.

Required:

Compute the following for Year 2:

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.)

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Homework Answers

Answer #1

d. Dividend payout ratio. = Dividend paid / Net Income = 47000 / 52000 = 90.38%

e. Dividend yield ratio. = Dividend per share / Market price per share = ( 47000 / 100000) / 8.30 = 5.66%

f. Return on total assets. = Net Income / Avg.Total Assets = 52000 / ( 1945000 + 2120000 ) / 2 = 52000 / 2032500 = 2.56%

g. Return on equity. = Net Income / Avg.Total stockholders’ equity = 52000 / ( 1325000 + 1320000 ) / 2

                                                                                                = 52000 / 1322500 = 3.93%

h. Book value per share. = Total stockholders’ equity / Number of outstanding shares = 1325000 / 100000 = $13.25

i. Working capital. = Current Assets - Current Liabilities = 855000 - 360000 = 495000

j. Current ratio. = Current Assets / Current Liabilities = 855000 / 360000 = 2.38

k. Acid-test (quick) ratio. = Quick Assets / Current Liabilities = (205000 + 330000) / 360000 = 1.49

l. Accounts receivable turnover. = Sales / Avg. Accounts Receivable = 1460000 / ( 330000 + 350000 ) / 2

                                                                                                   = 1460000 / 340000 = 4.29

m. Average collection period = 365 / Accounts receivable turnover = 365 / 4.29 = 85.08 Days

n. Inventory turnover. = Cost of goods sold / Avg. Inventory = 920000 / ( 300000 + 270000 ) / 2 = 920000 / 285000 = 3.23

o. Average sale period. = 365 / Inventory turnover = 365 / 3.23 = 113 Days

p. Times interest earned ratio = EBIT / Interest expense = 95000 / 20000 = 4.75 Times

q. Debt-to-equity ratio = Total Liabilities / Total stockholders’ equity = 620000 / 1325000 = 0.47

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