Question

Use the following information for questions 1 – 7. ($ 000s) Current Assets                               

Use the following information for questions 1 – 7.

($ 000s)

Current Assets                                   = $10,590

Inventories                                       = $6,450

Total Fixed Assets                              = $16,525

Total Assets                                      = $23,440

Current Liabilities                               = $4,670

Total Debt (long and short term)          = $7,225

Total Liabilities                                  = $11,095

Net Sales                                          = $25,300

Cost of Goods Sold                            = $18,950

Gross Operating Profit                         = $6,350

Net Operating Profit                           = $4,018

Bank Interest                                     = $1,587

Net Income Bef. Income Taxes             = $2,478

Net Income Bef. Extraordinary Item       = $1,897

Net Income                                       = $2,118

Market Value of Preferred Shares           = $43.50

Market Value of Common Shares           = $29.75

Annual dividends on Common shares    = $0.56

Annual dividends on Preferred shares    = $2.50

Find the following:

The debt/equity ratio is:

The inventory turnover is:

The turnover period in days is:

The current yield (dividend yield) on the common shares is:

The current yield (dividend yield) on the preferred shares is:

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Homework Answers

Answer #1

Ans.1. Debt/ equity ratio = Long term debt/ Shareholder's equity.

Long-term debt = $7225

Shareholder's equity = Total assets - Total liabilities

Shareholder's equity = $23,440 - $11,095 = $12,345

Debt / equity ratio = $7225 / $12345 = 0.58:1

Ans.2. Inventory turnover ratio = Cost of good sold / average inventory.

Inventory turnover ratio = $18,950 /$6450 = 2.93 times

Ans.3.turnover period = 365 / Inventory turnover ratio.

Turnover period = 365 / 2.93 = 124.57 days.

Ans.4. Current yield(dividend yield) on the common shares = Market value / Annual dividends

Current yield on common shares = 0.56 / 29.75 *100 = 1.88 %

Ans.5.Current yield(dividend yield) on the common shares = Annual dividends / Market value

Current yield on preferred stock = 2.50 / 43.50 *100 = 5.7%

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