Quantum Technology had $646,000 of retained earnings on December 31, 2013. The company paid common dividends of $34,800 in 2013 and had retained earnings of $506,000 on December 31, 2012.
a. How much did Quantum Technology earn during 2013?
Earnings available to common stockholders $
b. What would earnings per share be if 42,100 shares of common stock were outstanding? (Round your answer to 2 decimal places.)
Earnings per share
Botox Facial Care had earnings after taxes of $362,000 in 2012 with 200,000 shares of stock outstanding. The stock price was $81.80. In 2013, earnings after taxes increased to $450,000 with the same 200,000 shares outstanding. The stock price was $95.00.
a. Compute earnings per share and the P/E ratio for 2012. (The P/E ratio equals the stock price divided by earnings per share.)
b. Compute earnings per share and the P/E ratio for 2013.
c. Why did the P/E ratio change?
Amigo Software Inc. has total assets of $864,000, current liabilities of $166,000, and long-term liabilities of $149,000. There is $96,000 in preferred stock outstanding. Thirty thousand shares of common stock have been issued.
a. Compute book value (net worth) per share.
b. If there is $55,300 in earnings available to common stockholders and the firm’s stock has a P/E of 28 times earnings per share, what is the current price of the stock?
c. What is the ratio of market value per share to book value per share?
The Rogers Corporation has a gross profit of $707,000 and $329,000 in depreciation expense. The Evans Corporation also has $707,000 in gross profit, with $44,800 in depreciation expense. Selling and administrative expense is $176,000 for each company.
a. Given that the tax rate is 40 percent, compute the cash flow for both companies.
b. Calculate the difference in cash flow between the two firms.
A-Rod Fishing Supplies had sales of $2,010,000 and cost of goods sold of $1,350,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 5 percent of the total assets of $4,070,000.
What was the firm’s operating profit?
Jerry Rice and Grain Stores has $4,040,000 in yearly sales. The firm earns 4 percent on each dollar of sales and turns over its assets 2 times per year. It has $102,000 in current liabilities and $381,000 in long-term liabilities.
a. What is its return on stockholders’ equity?
b. If the asset base remains the same as computed in part a, but total asset turnover goes up to 3.00, what will be the new return on stockholders’ equity? Assume that the profit margin stays the same as do current and long-term liabilities.
A firm has net income before interest and taxes of $156,000 and interest expense of $25,500.
a. What is the times-interest-earned ratio?
b. If the firm’s lease payments are $49,500, what is the fixed charge coverage?
The balance sheet for Stud Clothiers is shown next. Sales for the year were $3,190,000, with 75 percent of sales sold on credit.
Balance Sheet 20XX
Assets Liabilities and Equity
Cash $ 24,000 Accounts payable $ 279,000
Accounts receivable 283,000 Accrued taxes 107,000
Inventory 266,000 Bonds payable (long-term) 130,000
Plant and equipment 450,000 Common stock 100,000
Paid-in capital 150,000
Retained earnings 257,000
Total assets $ 1,023,000 Total liabilities and equity $ 1,023,000
Compute the following ratios:
a. Current ratio times
b. Quick ratio times
c. Debt-to-total-assets ratio %
d. Asset turnover times
e. Average collection period
Gates Appliances has a return-on-assets (investment) ratio of 17 percent.
a. If the debt-to-total-assets ratio is 60 percent, what is the return on equity?
b. If the firm had no debt, what would the return-on-equity ratio be?
Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation.
a. Butters Corporation has a profit margin of 7 percent and its return on assets (investment) is 13 percent. What is its assets turnover?
b. If the Butters Corporation has a debt-to-total-assets ratio of 40.00 percent, what would the firm’s return on equity be?
c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 30.00 percent?
On December 31 of last year, Wolfson Corporation had in inventory 470 units of its product, which cost $19 per unit to produce. During January, the company produced 870 units at a cost of $22 per unit.
Assuming that Wolfson Corporation sold 840 units in January, what was the cost of goods sold? (Assume FIFO inventory accounting.)
Sales for Ross Pro’s Sports Equipment are expected to be 44,000 units for the coming month. The company likes to maintain 25 percent of unit sales for each month in ending inventory. Beginning inventory is 10,500 units.
How many units should the firm produce for the coming month?
Harry’s Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecasted sales figures:
Actual Forecast Additional Information
November $ 240,000 January $ 360,000 April forecast $ 380,000
December 300,000 February 400,000
Of the firm’s sales, 40 percent are for cash and the remaining 60 percent are on credit. Of credit sales, 50 percent are paid in the month after sale and 50 percent are paid in the second month after the sale. Materials cost 40 percent of sales and are purchased and received each month in an amount sufficient to cover the following month’s expected sales. Materials are paid for in the month after they are received. Labor expense is 25 percent of sales and is paid for in the month of sales. Selling and administrative expense is 15 percent of sales and is also paid in the month of sales. Overhead expense is $30,000 in cash per month.
Depreciation expense is $10,400 per month. Taxes of $8,400 will be paid in January, and dividends of $4,000 will be paid in March. Cash at the beginning of January is $88,000, and the minimum desired cash balance is $83,000.
a. Prepare a schedule of monthly cash receipts for January, February, and March.
Sales $ $ $ $ $
Cash sales $ $ $
One month after sale
Two months after sale
Total cash receipts
The Alliance Corp. expects to sell the following number of units of copper cables at the prices indicated, under three different scenarios in the economy. The probability of each outcome is indicated.
Outcome Probability Units Price
A 0.70 310 $ 37
B 0.20 540 52
C 0.10 850 62
What is the expected value of the total sales projection?
The Manning Company has financial statements as shown next, which are representative of the company’s historical average.
The firm is expecting a 35 percent increase in sales next year, and management is concerned about the company’s need for external funds. The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among liabilities, only current liabilities vary directly with sales.
Sales $ 260,000
Earnings before interest and taxes $ 54,000
Earnings before taxes $ 45,300
Earnings after taxes $ 28,600
Dividends $ 8,580
Assets Liabilities and Stockholders’ Equity
Cash $ 5,000 Accounts payable $ 24,600
Accounts receivable 39,000 Accrued wages 2,050
Inventory 60,000 Accrued taxes 4,550
Current assets $ 104,000 Current liabilities $ 31,200
Fixed assets 97,000 Notes payable 8,700
Long-term debt 23,500
Common stock 121,000
Retained earnings 16,600
Total assets $ 201,000 Total liabilities and
stockholders’ equity $ 201,000
Using the percent-of-sales method, determine whether the company has external financing needs, or a surplus of funds. (Hint: A profit margin and payout ratio must be found from the income statement.)
Healthy Foods Inc. sells 50-pound bags of grapes to the military for $15 a bag. The fixed costs of this operation are $85,000, while the variable costs of grapes are $.10 per pound.
What is the break-even point in bags?
Calculate the profit or loss (EBIT) on 10,000 bags and on 39,000 bags.
What is the degree of operating leverage at 19,000 bags and at 39,000 bags?
If Healthy Foods has an annual interest expense of $8,000, calculate the degree of financial leverage at both 19,000 and 39,000 bags.
What is the degree of combined leverage at both 19,000 and 39,000 bags?
The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s autograph stamped on them. Each bat sells for $53 and has a variable cost of $28. There are $40,000 in fixed costs involved in the production process.
Compute the break-even point in units.
Find the sales (in units) needed to earn a profit of $19,000.
Air Purifier Inc. computes its break-even point strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $2,500,000, but 10 percent of this value is represented by depreciation. Its contribution margin (price minus variable cost) for each unit is $50. How many units does the firm need to sell to reach the cash break-even point?
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