Question

Question 1 Net income does not appear in the numerator of the A. return on assets....

Question 1

Net income does not appear in the numerator of the

A.

return on assets.
B.

profit margin.
C.

payout ratio.
D.

return on common stockholders' equity.

Question 2

he following information pertains to Sampson Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

Assets
Cash and short-term investments   $ 45,000
Accounts receivable (net)   25,000
Inventory   20,000
Property, plant and equipment   210,000
Total Assets   $300,000

Liabilities and Stockholders' Equity
Current liabilities   $ 50,000
Long-term liabilities   90,000
Stockholders' equity—common   160,000
Total Liabilities and Stockholders' Equity    $300,000

Income Statement
Sales   $ 120,000
Cost of goods sold   66,000
Gross profit   54,000
Operating expenses   18,000
Net income    $ 36,000

Number of shares of common stock   6,000
Market price of common stock   $33
Dividends per share   .50

What is the price-earnings ratio for Sampson?

A.

6 times
B.

6.6 times
C.

1.1 times
D.

5.5 times

Question 3

The following information pertains to Sampson Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

Assets
Cash and short-term investments $ 45,000
Accounts receivable (net) 25,000
Inventory 20,000
Property, plant and equipment 210,000
Total Assets $300,000

Liabilities and Stockholders' Equity
Current liabilities $ 50,000
Long-term liabilities 90,000
Stockholders' equity—common 160,000
Total Liabilities and Stockholders' Equity $300,000

Income Statement
Sales $ 120,000
Cost of goods sold 66,000
Gross profit 54,000
Operating expenses 30,000
Net income $ 24,000

Number of shares of common stock 6,000
Market price of common stock $20
Dividends per share .50

What is the current ratio for Sampson?

A.

1.30:1
B.

1.40:1
C.

1.80:1
D.

0.64
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Homework Answers

Answer #1

Awnser::

Question-1

Option-c

This is because in all other options total of the net income shall be taken to calculate the ratios but in the payout ratio the net income which is intended to be given to the stake holders shall be taken into account and not the total net income.

The remaining amount shall be used in the further business.

Question 2:::

PE ratio=market price per share/earnings per share.

Hence earnings per share=net income/common stock

=36000/6000=6 per share.

Hence PE ratio=33/6=5.5

Question 3::::

Current ratio=current assets/current liabilities

=total assets-PPE/current liabilities

=300000-210000/50000

=90000/50000=1.80:1

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