Question

39. On December 31, 2007 and 2008, Taft Corporation had 100,000 shares of common stock issued and outstanding. Additional information:

Stockholders' equity at 12/31/2008	$4,500,000
Net income year ended 12/31/2008	1,200,000
Market price per share of common stock at 12/31/2008	144

The price-earnings ratio on common stock at December 31, 2008, was

a.	10
b.	12
c.	14
d.	16

The balance sheet at the end of the first year of operations indicates the following:

	2009
Total current assets	$600,000
Total investments	85,000
Total property, plant, and equipment	900,000
Total current liabilities	250,000
Total long-term liabilities	350,000
Common stock, $10 par	600,000
Paid-in capital in excess of par-common stock	60,000
Retained earnings	325,000

____ 40.   What is the debt ratio for 2009 (rounded to one decimal places)?

a.	37.9%
b.	40.0%
c.	22.1%
d.	41.7%

____ 41.   If sales revenue for 2009 is $950,000, what is the asset turnover for 2009 (round to two decimal places)?

a.	2.64
b.	1.58
c.	0.96
d.	0.60

____ 42.   Which of the following is NOT included in the DuPont framework of the return on equity ratio?

a.	Return on sales
b.	Current ratio
c.	Asset turnover
d.	Asset-to-equity ratio

The following data came from the financial statements of the Bradshaw Company:

Revenue	$900,000		Assets	$600,000
Expenses	600,000		Liabilities	100,000
Net income	300,000		Equity	500,000

____ 43.   Compute the return on equity.

a.	40%
b.	50%
c.	30%
d.	60%

____ 44.   Compute the asset turnover (round to two decimal places).

a.	1.25
b.	1.40
c.	1.50
d.	1.60

Answer 1

39 ) Earning per share = 1200000/100000 = 12 per share

Price earning per share = MPS/EPS = 144/12 = 12 Times

So answer is b) 12

40) Debt ratio = Total liabilities/Total assets

Total liabilities = 250000+350000 = 600000

Total assets = 600000+85000+900000 = 1585000

Debt ratio = 600000/1585000 = 37.9%

So answer is a) 37.9%

41) Assets turnover = Sales /Assets = 950000/1585000 = 0.60

So answr is d) 0.60

42) Return on sales, Assets turnover ratio and return on equity all are include in Dupont formula but current ratio is not include in Dupont formula

So answer is b) Current ratio

43) Return on equity = Net income/Equity = 300000/500000 = 60%

SO answer is d) 60%

44) Assets turnover = Sales/Assets = 900000/600000 = 1.5

So answer is c) 1.50