BP2-5

Debt Management Ratios

Bobs Toys, Inc. reported a debt-to-equity ratio of 1.75 times at the end of 2015. If the firms total debt at year-end was $25 million, how much equity does bobs have on its balance sheet?

Assume that Bobs total debt ratio is .64

BP2-6

Debt Management Ratios

You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $30 million in assets with $29 million in debt and $1 million in equity. LotsofEquity, Inc. finances its $30 million in assets with $1 million in debt and $29 million in equity. Calculate the debt ratio and equity multiplier for the two firms.

BP2-7

Profitability Ratios

Maggies Skunk Removal Corp.s 2015 income statement listed net sales = $12.5 million, gross profit of $6.9 million, EBIT = $5.6 million, net income available to common stockholders = $3.2 million, and common stock dividends = $1.2 million. The 2015 year-end balance sheet listed total assets of $52.5 million and common stockholders equity of $21 million with 2 million shares outstanding. Calculate the profit margin, gross profit margin, operating profit margin, ROA and ROE.

BP2-8

Profitability Ratios

In 2015, Drews Jamming Music, Inc. announced an ROA of 8.56 percent, ROE of 14.5 percent, and profit margin of 20.5 percent. The firm had total assets of $9.5 million at year-end 2015. Calculate the 2015 values of net income available to common stockholders, common stockholders equity, and net sales for Jakes Jamming Music, Inc.

BP2-10

Market Value Ratios

Green Hill Golf Clubs market-to-book ratio is currently 2.5 times and the PE ratio is 6.75 times. If Green Hill Golf Clubs common stock is currently selling at $22.50 per share, what is the book value per share and earnings per share?

IP2-2

Liquidity and Asset Management Ratios

Mandesa, Inc., has current liabilities of $8 million, current ratio of 2 times, inventory turnover ratio of 12 times, average collection period of 30 days, and total sales of $64 million. Calculate the value of cash and marketable securities. Assume all sales are credit sales. Assume that Mandesas cost of sales are $48 mill