Question

# The following data is available for Everest Company: Credit Sales                               &nbs

The following data is available for Everest Company:

Credit Sales                                                                                 \$1,702

Net Income                                                                                    \$112

Total Current Assets                                                                       \$366

Total Current Liabilities                                                                  \$226

Accounts Receivable, current year                                                   \$160

Accounts Receivable, prior year                                                      \$156

Total Stockholders' Equity, current year                                          \$550

Total Stockholders' Equity, prior year                                              \$500

Retained Earnings, current year                                                      \$366

Retained Earnings, prior year                                                          \$346

Market price per share                                                                     \$50

Average Number of Common Shares Outstanding during year            46

Required:

Compute the following ratios:

A) current ratio

B) average collection period in days

C) return on stockholders' equity

D) price-earnings ratio

E) dividend yield

A. CURRENT RATIO= Current Asset/Current Liability

=366/226 = 1.62 times

B. average collection period in days= Average Receivables*365/Net Credit Sales

=(160+156)/2*365/1702 =34 days

C. return on stockholders' equity= Net income/Shareholders Fund*100

=112*100/(550+336) =12.64%

D.  price-earnings ratio= MPS/EPS

EPS= 112/46 =2.43

price-earnings ratio= 50/2.43 =20.57

E. dividend yield= DPS/EPS

In this problem DPS not given. So dividend yield cant be calculated.

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