Question

"Flynn Plastics Company reports the following data in its May 30, 2020 financial statements: Gross sales...

"Flynn Plastics Company reports the following data in its May 30, 2020 financial statements:

Gross sales $225,000

Current assets $ 40,000

Long-term assets $100,000

Current liabilities $16,000

Long-term liabilities $44,000

Owners' equity $80,000

Net income $7,200

Number of common shares 5,000

Compute the following ratios: current ratio , debt-to-equity , return on owners’ equity , and earnings per share .

Business   Accounting   
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Answer #1

Calculation of Ratios

A) Current Ratio= Current Assets/ Current Liabilities

Current Ratio= 40000/16000 = 2.5 times

B)Debt to Equity Ratio =( Current Liabilities + Long term liabilities)/ Owners Equity

Debt to Equity Ratio =(16000+ 44000)/80000

Debt to Equity Ratio =0.75

C)Return on Owners Equity =Net Income/ Owners Equity*100

Return on Owners Equity =7200/80000*100

Return on Owners Equity =9%

D)Earnings per share = Net Income/ Number of Common shares

Earnings per share =7200/5000

Earnings per share =1.44 per share

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