Question

Given the following information on Cherry Corporation, please calculate the requested ratios that follow the financial...

Given the following information on Cherry Corporation, please calculate the requested ratios that follow the financial information. You must show your work, that is how you arrived at your calculated figure or you will not receive the indicated point value.

Cherry Corporation's Balance Sheet

Assets

Current Assets

Cash $ 925,000

Accounts Receivable $2,550,000

Marketable Securities $1,025,000

Inventory $1,425,000

Total Current Assets $ 5,925,000

Fixed Assets

Property Plant & Equip $6,975,000

Research & Develop. $1,157,000

Good Will $793,000

Total Fixed Assets $ 8,925,000

Total Assets $14,850,000

Liabilities & Owner's Equity

Current Liabilities

Accounts Payable $1,425,000

Notes Payable $2,650,000

Total Current Liabilities $4,075,000

Long-term Liabilities

Long-term Debt $3,857,000

Owner's Equity $6,918,000

Total Liabilities & Equity $14,850,000

Cherry's Income Statement

Sales $29,870,000

Cost of Goods Sold $22,591,000

Gross Profit $ 7,279,000

Sales, General & Admin Exp. $ 800,700

Depreciation $ 1,462,500

Operating Expenses $ 1,365,800

Earnings Before Interest & Taxes $ 3,650,000

Interest Expense $ 520,455

Earnings Before Taxes $ 3,129,545

Taxes (25%) $ 782,386

Preferred Dividend $ 362,000

Net Income $ 1,985,159

Common Dividends $ 794,064

Retained Earnings $ 1,191,095

Given the above information please calculate the following:

What are the Earnings per Share of Cherry (with outstanding shares of 500,000)?

What is the Quick Ratio of Cherry?

If Cherry is selling in the market at $47.64 per share, what is the P/E Ratio of Cherry Corp?

What is the Dividend Payout Ratio of Cherry?

What is Cherry's debt-to-assets ratio?

What is Cherry's Gross Profit margin? Net Profit Margin?

Please calculate Cherry's Return on Equity.

Also, please calculate Cherry's Return on Assets.

What is Cherry's Days Sales Outstanding?

**Using the following formula; ROE x Retention Ratio = Growth Rate; Please calculate the growth rate of Cherry.

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Homework Answers

Answer #1

a)Earning per share=(net income-dividend)/shares outstanding
=(1985159-362000)/500000
=3.25
b)Quick ratio=(cash+acc rec+mark sec)/current liabilities
=(925000+2550000+1025000)/4075000=1.10
c)PE ratio=market price per share/earning per share
=47.64/3.25=14.66
d)dividend payout ratio=dividend per share/earning per share
=(794064/500000)/((1985159-362000)/500000)
=48.92%
e)debt to assets ratio=total liabilities/total assets
=(4075000+3857000)/(14850000)=0.53
f)Gross profit margin=gross profit/sales
=7279000/29870000=24.37%
net profit margin=net profit/sales
=1985159/29870000=6.65%
g)Return on equity=net income/equity
=1985159/6918000=28.70%
h)Return on assets=net income/assets
=1985159/14850000=13.37%
i)growth rate=ROE*retention ratio
retention ratio=1-dividend payout ratio
growth=28.70%*(1-48.92%)
=14.66%

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