Question

Amounts are in thousands of dollars (except number of shares and price per share):

Kiwi Fruit Company Balance Sheet
Cash and equivalents	$	470
Operating assets		730
Property, plant, and equipment		2,900
Other assets		150
Total assets	$	4,250
Current liabilities	$	980
Long-term debt		1,280
Other liabilities		160
Total liabilities	$	2,420
Paid in capital	$	380
Retained earnings		1,450
Total equity	$	1,830
Total liabilities and equity	$	4,250

Kiwi Fruit Company Income Statement
Net sales	$	9,600
Cost of goods sold		(7,600	)
Gross profit	$	2,000
Operating expense		(950	)
Operating income	$	1,050
Other income		145
Net interest expense		(200	)
Pretax income	$	995
Income tax		(235	)
Net income	$	760
Earnings per share	$	2.00
Shares outstanding		380,000
Recent price	$	42.50

Kiwi Fruit Company Cash Flow Statement
Net income	$	760
Depreciation and amortization		228
Increase in operating assets		(90	)
Decrease in current liabilities		(118	)
Operating cash flow	$	780
Net (purchase) sale of property	$	185
Increase in other assets		(70	)
Investing cash flow	$	115
Net (redemption) issuance of LTD	$	(174	)
Dividends paid		(176	)
Financing cash flow	$	(350	)
Net cash increase	$	545

Calculate the price-book, price-earnings, and price-cash flow ratios for Kiwi Fruit. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

Answer :

1) Market value of equity = 380,000 * $ 42.50

= $ 16,150,000

Book value of equity = $ 1,830,000

Price book ratio = $ 16,150,000 / $ 1,830,000 = 8.83

Price book ratio = 8.83.

2) Price Earnings ratio = Value of total equity / Net income

= $ 16,150,000 / $ 760,000 = 21.25

Price Earnings ratio = 21.25.

3) Price cash flow ratio = Value of total equity / Net increase in cash

= $ 16,150,000 / $ 545,000 = $ 29.63

   Price cash flow ratio = 29.63.