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Below is some additional information on Garlington: 2015 Current ratio1.81 Return on equity9% Earnings per share$1.68 Dividends per share$1 Number of common shares outstanding108,000 Common
- Below is some additional information on Garlington:
- 2015
Current ratio1.81
Return on equity9%
Earnings per share$1.68
Dividends per share$1
Number of common shares outstanding108,000
Common share price$18
- Calculate the company's 2016 current ratio, ROE, EPS, and DPS based on the expansion and financing as in part a.
- Because of an agreement with their lender, Garlington's current ratio cannot drop below 1.7 or it will violate a debt covenant. How much can the company increase its notes payable and still not violate its minimum current ratio?
- Assume that Garlington increases its notes payable to the maximum allowed under its current ratio restriction and issues stock to raise the remaining funds required. Calculate the company's ROE, EPS, and DPS.
- Recalculate Garlington's ROE, EPS, and DPS ifallthe additional financing was obtained through the sale of new common stock. Do you think the financing choice matters to the investors holding the common stock?
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Fundamentals of Advanced Accounting
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
7th edition
1259722635, 978-1259722639
