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Assume the following data for Cable Corporation and Multi-Media Inc. Cable Corporation Multi-Media Inc. Net income $ 39,200 $ 176,000 Sales 352,000 2,110,000 Total assets

Assume the following data for Cable Corporation and Multi-Media Inc.

Cable Corporation Multi-Media Inc.
Net income $ 39,200 $ 176,000
Sales 352,000 2,110,000
Total assets 474,000 994,000
Total debt 185,000 474,000
Stockholders' equity 289,000 520,000

a-1.

Compute return on stockholders equity for both firms. (Input your answers as a percent rounded to 2 decimal places.)

Return on Stockholders Equity
Cable Corporation %
Multi-Media, Inc. %

a-2. Which firm has the higher return?
Multi-Media Inc.
Cable Corporation

b.

Compute the following additional ratios for both firms. (Input your Net income/Sales, Net income/Total assets and Debt/Total asset answers as a percent rounded to 2 decimal places. Round your Sales/Total assets answers to 2 decimal places.)

Cable Corporation Multi-Media Inc.
Net income/Sales % %
Net income/Total assets % %
Sales/Total assets times times
Debt/Total assets % %

The balance sheet for Stud Clothiers is shown next. Sales for the year were $3,810,000, with 75 percent of sales sold on credit.

STUD CLOTHIERS Balance Sheet 20XX
Assets Liabilities and Equity
Cash $ 95,000 Accounts payable $ 248,000
Accounts receivable 290,000 Accrued taxes 143,000
Inventory 315,000 Bonds payable (long-term) 168,000
Plant and equipment 453,000 Common stock 100,000
Paid-in capital 150,000
Retained earnings 344,000
Total assets $ 1,153,000 Total liabilities and equity $ 1,153,000

Compute the following ratios: (Use a 360-day year. Do not round intermediate calculations. Round your answers to 2 decimal places. Input your debt-to-total assets answer as a percent rounded to 2 decimal places.)

a. Current ratio times
b. Quick ratio times
c. Debt-to-total-assets ratio %
d. Asset turnover times
e. Average collection period days

Using the income statement for Times Mirror and Glass Co., compute the following ratios:

TIMES MIRROR AND GLASS Co. Income Statement
Sales $ 231,000
Cost of goods sold 138,000
Gross profit $ 93,000
Selling and administrative expense 43,900
Lease expense 11,800
Operating profit* $ 37,300
Interest expense 11,100
Earnings before taxes $ 26,200
Taxes (30%) 10,480
Earnings after taxes $ 15,720
*Equals income before interest and taxes.

a.

Compute the interest coverage ratio. (Round your answer to 2 decimal places.)

Interest coverage times

b.

Compute the fixed charge coverage ratio. (Round your answer to 2 decimal places.)

Fixed charge coverage times

The total assets for this company equal $171,000. Set up the equation for the Du Pont system of ratio analysis.

c. Compute the profit margin ratio. (Input your answer as a percent rounded to 2 decimal places.)

Profit margin %

d. Compute the total asset turnover ratio. (Round your answer to 2 decimal places.)

Total asset turnover times

e.

Compute the return on assets (investment). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Return on assets %

Quantum Moving Company has the following data. Industry information also is shown.
Company data Industry Data on
Year Net Income Total Assets Net Income/Total Assets
2011 $ 487,000 $ 2,821,000 14.8 %
2012 473,000 3,254,000 7.4
2013 386,000 3,812,000 4.9
Year Debt Total Assets Industry Data on Debt/Total Assets
2011 $ 1,676,000 $ 2,821,000 52.3 %
2012 1,762,000 3,254,000 46.0
2013 1,921,000 3,812,000 31.0
a.

Calculate the company's data in terms of: (Input your answers as a percent rounded to 1 decimal place.)

2011 2012 2013
Net income/Total assets % % %
Debt/Total assets % % %
b.

As an industry analyst comparing the firm to the industry, are you likely to praise or criticize the firm in terms of:

Praise/Criticize
Net income/Total assets (Click to select)CriticizePraise
Debt/Total assets (Click to select)PraiseCriticize

The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting.

CANTON CORPORATION Income Statement for 2013
Sales $ 236,800 (14,800 units at $16.00)
Cost of goods sold 148,000 (14,800 units at $10.00)
Gross profit $ 88,800
Selling and administrative expense 11,840
Depreciation 11,600
Operating profit $ 65,360
Taxes (30%) 19,608
Aftertax income $ 45,752

a.

Assume in 2014 the same 14,800-unit volume is maintained, but that the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $10.00 per unit. Also assume selling and administrative expense will be 5 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute aftertax income for 2014. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Aftertax income $

b.

In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Gain in aftertax income %

c.

Now assume that in 2015 the volume remains constant at 14,800 units, but the sales price decreases by 15 percent from its year 2014 level. Also, because of FIFO inventory policy, cost of goods sold reflects the inflationary conditions of the prior year and is $10.50 per unit. Further, assume selling and administrative expense will be 5 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute the aftertax income. (Round the sales price per unit to 2 decimal places but do not round any other intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Aftertax income $

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