Hyrkas Corporation's most recent balance sheet and income statement appear below: |
Statement of Financial Position December 31, Year 2 and Year 1 (in thousands of dollars) |
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Year 2 | Year 1 | |||
Asset: | ||||
Current assets: | ||||
Cash | $ | 100 | $ | 110 |
Accounts receivable | 210 | 220 | ||
Inventory | 110 | 100 | ||
Prepaid expenses | 15 | 15 | ||
Total current assets | 435 | 445 | ||
Plant and equipment, net | 890 | 870 | ||
Total assets | $ | 1,325 | $ | 1,315 |
Liabilities and stockholders' equity: | ||||
Current liabilities: | ||||
Accounts payable | $ | 160 | $ | 150 |
Accrued liabilities | 50 | 50 | ||
Notes payable, short term | 100 | 110 | ||
Total current liabilities | 310 | 310 | ||
Bonds payable | 190 | 240 | ||
Total liabilities | 500 | 550 | ||
Stockholders' equity: | ||||
Preferred stock, $100 par value, 10% | 200 | 200 | ||
Common stock, $1 par value | 100 | 100 | ||
Additional paid-in capital--common stock | 110 | 110 | ||
Retained earnings | 415 | 345 | ||
Total stockholders' equity | 825 | 755 | ||
Total liabilities and stockholders' equity | $ | 1,325 | $ | 1,305 |
Income Statement For the Year Ended December 31, Year 2 (in thousands of dollars) |
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Sales (all on account) | $ | 1,420 | |
Cost of goods sold | 874 | ||
Gross margin | 546 | ||
Selling and administrative expenses | 291 | ||
Net operating income | 255 | ||
Interest expense | 55 | ||
Net income before taxes | 200 | ||
Income taxes (30%) | 60 | ||
Net income | $ | 140 | |
Dividends on common stock during Year 2 totaled $50 thousand. The market price of common stock at the end of Year 2 was $9.26 per share. |
f. |
Compute the return on total assets for Year 2.(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
g. |
Compute the return on common stockholders' equity for Year 2.
(Round your answer to 2 decimal
places.) |
h. |
Compute the book value per share for Year 2. (Round your answer to 2 decimal places.) |
i. |
Compute the working capital for Year 2. (Input your answer in thousands of dollars.) |
j. |
Compute the current ratio for Year 2. (Round your answer to 2 decimal places.) |
k. | Compute the acid-test ratio for Year 2.(Round your answer to 2 decimal place.) |
l. | Compute the accounts receivable turnover for Year 2. (Round your answer to 2 decimal places.) |
m. |
Compute the average collection period for Year 2. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to one decimal place.) |
n. |
Compute the inventory turnover for Year 2. (Round your answer to 2 decimal places.) |
o. |
Compute the average sale period for Year 2. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal place.) |
p. |
Compute the times interest earned for Year 2. (Round your answer to 2 decimal places.) |
q. |
Compute the debt-to-equity ratio for Year 2. (Round your answer to 2 decimal places.) |
f) Return on total assets for year 2 = Net income / Average total assets
Average total assets = Beginning assets + Ending assets / 2 = $1315 + $1325 /2 = $1320
Net income = 140
Return on total assets = 140 / 1320 = 0.1
g) Return on common stockholder's equity for year 2 = Net income - Preferred dividends / Average common equity
where, Average common equity = (Beginning common equity + Ending common equity) /2
Beginning common equity = Total equity in year 1 - Preferred equity in year 1= $755 -$200 = $555
Ending common equity = Total equity in year 2 - Preferred equity in year2 P= $825 -$200 = $625
Average common equity = $555 + $625 / 2 = $590
Preferred Dividends = 10% of $200 = $20
Return on common stockholder's equity = ($140 - $20) / 590 = 0.20
h) Book value per share for year 2 = (Total shareholder's equity - Preferred equity) / Total common shares in year 2
= ($825 - $200) / 100 = $625 / 100 = $6.25
i) Working capital for year2 = current assets in year 2 - current liabilities in year 2
For year 2, Current assets = $435, curent liabilities = $310
Working capital = $435 - $310 = $125
J) Current ratio for year 2 = Current assets in year 2 / current liabilities in year 2
= $435 / $310 = 1.4
k) Acid test ratio for year 2 = (Cash + Accounts Receivable) for year 2 / current liabilities for year 2
= $100 + $210 / 310 = $310 / $310 = 1
l) Accounts receivable turnover ratio for year 2 = Sales / Average accounts receivable
where, average accounts receivable = Beginning accounts receivable + Ending accounts receivable / 2
= $220 + $210 / 2 = $430 / 2= $215
Accounts receivable turnover ratio = $1420 / $215 = 6.60
m) Average collection period for year 2 = 365 / Accounts receivables turnover for year 2
Accounts receivables turnover = 6.60
Average collection period for year 2 = 365 / 6.6
= 55.3
n) Inventory turnover for year 2 = cost of the goods sold for year 2 / Average inventory
where,average inventory == Beginning inventory + Ending inventory / 2
= ($100 + $110) / 2 = $105
Cost of the goods sold = $874 / $105 = 8.32
p) Times interest earned for year 2 = Net operating income for year 2 / Interest expense for year 2
= $255 / 55 = 4.63
q) Debt equity ratio for year 2 = Total liabilities in year 2 / Equity in year 2
= $500 / $825 = 0.60
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