Question

You are the new CFO of Risk Surfing Ltd, which has current assets of $ 7 920, net fixed assets of $17 700, current liabilities of $4 580, and long term debts of $5 890. Required: a. Calculate the owners’ equity and build a balance sheet for the company? b. How much is the networking capital of the company? c. Calculate the return on assets of the company given that Return on Equity is 30%? d. What is the PE of the company if the total number of ordinary shares outstanding is 2000 and the market price of each share is $12?

Answer 1

A.. Owners equity = Total asset - Total debt & liabilities

=25,620 - 10,470 = 15150

Balance sheets

Assets		Liabilities
Current assets	7920	Current liabilities	4580
Fixed assets	17700	Long term debt	5890
		Owners equity	15150
	25,620		25,620

B.

Net working capital = Current assets- Current liability

=7920 -4580= 3340

C.

Return on assets = Net income / Total assets =

Net income = Equity * ROE = 15150*30%=4545

So ROA = 4545 / 25,620 = 17.74%

D.

P E = MPS / EPS

= 12 / (4545/2000)

= 12 / 2.2725

=5.28