Elite Trailer Parks has an operating profit of $282,000. Interest expense for the year was $39,200; preferred
Question:
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Elite Trailer Parks has an operating profit of $282,000. Interest expense for the year was $39,200; preferred dividends paid were $29,500; and common dividends paid were $40,900. The tax was $61,700. The firm has 25,800 shares of common stock outstanding.
a.Calculate the earnings per share and the common dividends per share for Elite Trailer Parks.(Round your answers to 2 decimal places.)
b.What was the increase in retained earnings for the year?
2.
Botox Facial Care had earnings after taxes of $350,000 in 20X1 with 200,000 shares of stock outstanding. The stock price was $72.50. In 20X2, earnings after taxes increased to $420,000 with the same 200,000 shares outstanding. The stock price was $83.00.
a.Compute earnings per share and the P/E ratio for 20X1. (The P/E ratio equals the stock price divided by earnings per share.)(Do not round intermediate calculations. Round your final answers to 2 decimal places.)
b.Compute earnings per share and the P/E ratio for 20X2.(Do not round intermediate calculations. Round your final answers to 2 decimal places.)
c.Why did the P/E ratio change?(Do not round intemediate calculations. Input your answers as percents rounded to 2 decimal places.)
3.
The Rogers Corporation has a gross profit of $730,000 and $277,000 in depreciation expense. The Evans Corporation also has $730,000 in gross profit, with $45,000 in depreciation expense. Selling and administrative expense is $179,000 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.
4.
The Holtzman Corporation has assets of $386,000, current liabilities of $49,000, and long-term liabilities of $110,000. There is $31,100 in preferred stock outstanding; 20,000 shares of common stock have been issued.
a.Compute book value (net worth) per share.(Round your answer to 2 decimal places.)
b.If there is $32,000 in earnings available to common stockholders, and Holtzman?s stock has a P/E of 24 times earnings per share, what is the current price of the stock?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)
c.What is the ratio of market value per share to book value per share?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)
5.
For December 31, 20X1, the balance sheet of Baxter Corporation was as follows:
Current Assets
Liabilities
Cash
$
27,000
Accounts payable
$
29,000
Accounts receivable
32,000
Notes payable
37,000
Inventory
42,000
Bonds payable
67,000
Prepaid expenses
13,700
Fixed Assets
Stockholders? Equity
Gross plant and equipment
$
267,000
Preferred stock
$
37,000
Less: Accumulated depreciation
53,400
Common stock
72,000
Paid in Capital
42,000
Net plant and equipment
$
213,600
Retained earnings
44,300
Total assets
$
328,300
Total liabilities and stockholders? equity
$
328,300
Sales for 20X2 were $305,000, and the cost of goods sold was 55 percent of sales. Selling and administrative expense was $30,500. Depreciation expense was 10 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 12 percent, while the interest rate on the bonds payable was 14 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 30 percent.
$3,700 in preferred stock dividends were paid, and $3,481 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding.
During 20X2, the cash balance and prepaid expenses balances were unchanged. Accounts receivable and inventory increased by 12 percent. A new machine was purchased on December 31, 20X2, at a cost of $52,000.
Accounts payable increased by 20 percent. Notes payable increased by $7,700 and bonds payable decreased by $18,500, both at the end of the year. The preferred stock, common stock, and capital paid in excess of par accounts did not change.
a.Prepare an income statement for 20X2.(Round EPS answer to 2 decimal places.)
b.Prepare a statement of retained earnings for 20X2.
c.Prepare a balance sheet as of December 31, 20X2.(Amounts to be deducted should be indicated with parentheses or a minus sign.)
6.
Refer to the following financial statements for Crosby Corporation:
CROSBY CORPORATION
Income Statement
For the Year Ended December 31, 20X2
Sales
$
3,940,000
Cost of goods sold
2,580,000
Gross profit
$
1,360,000
Selling and administrative expense
697,000
Depreciation expense
272,000
Operating income
$
391,000
Interest expense
88,000
Earnings before taxes
$
303,000
Taxes
234,000
Earnings after taxes
$
69,000
Preferred stock dividends
10,000
Earnings available to common stockholders
$
59,000
Shares outstanding
150,000
Earnings per share
$
0.39
Statement of Retained Earnings
For the Year Ended December 31, 20X2
Retained earnings, balance, January 1, 20X2
$
342,700
Add: Earnings available to common stockholders, 20X2
59,000
Deduct: Cash dividends declared and paid in 20X2
218,000
Retained earnings, balance, December 31, 20X2
$
183,700
Comparative Balance Sheets
For 20X1 and 20X2
Year-End
20X1
Year-End
20X2
Assets
Current assets:
Cash
$
171,000
$
127,000
Accounts receivable (net)
543,000
546,000
Inventory
656,000
697,000
Prepaid expenses
63,500
39,700
Total current assets
$
1,433,500
$
1,409,700
Investments (long-term securities)
92,000
81,100
Gross plant and equipment
$ 2,250,000
$ 2,730,000
Less: Accumulated depreciation
1,750,000
2,022,000
Net plant and equipment
500,000
708,000
Total assets
$
2,025,500
$
2,198,800
Liabilities and Stockholders? Equity
Current liabilities:
Accounts payable
$
365,000
$
626,000
Notes payable
514,000
514,000
Accrued expenses
79,800
57,100
Total current liabilities
$
958,800
$
1,197,100
Long-term liabilities:
Bonds payable, 20X2
134,000
228,000
Total liabilities
$
1,092,800
$
1,425,100
Stockholders? equity:
Preferred stock, $100 par value
$
90,000
$
90,000
Common stock, $1 par value
150,000
150,000
Capital paid in excess of par
350,000
350,000
Retained earnings
342,700
183,700
Total stockholders? equity
$
932,700
$
773,700
Total liabilities and stockholders? equity
$
2,025,500
$
2,198,800
a.Prepare a statement of cash flows for the Crosby Corporation:(Amounts to be deducted should be indicated with parentheses or a minus sign.)
b.Compute the book value per common share for both 20X1 and 20X2 for the Crosby Corporation.(Round your answers to 2 decimals places.)
c.If the market value of a share of common stock is 3.3 times book value for 20X1, what is the firm?s P/E ratio for 20X2 vs. 20X1?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)
7.
Amigo Software Inc. has total assets of $889,000, current liabilities of $192,000, and long-term liabilities of $154,000. There is $87,000 in preferred stock outstanding. Thirty thousand shares of common stock have been issued.
a.Compute book value (net worth) per share.(Round your answer to 2 decimal places.)
b.If there is $56,300 in earnings available to common stockholders, and the firm?s stock has a P/E of 23 times earnings per share, what is the current price of the stock?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)
c.What is the ratio of market value per share to book value per share?(Do not round intermediate calculations. Round your final answer to 2 decimal places.)
8.
Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation.
a.Butters Corporation has a profit margin of 5.5 percent and its return on assets (investment) is 15.5 percent.What is its assets turnover?(Round your answer to 2 decimal places.)
b.If the Butters Corporation has a debt-to-total-assets ratio of 25.00 percent, what would the firm?s return on equity be?(Input your answer as a percent rounded to 2 decimal places.)
c.What would happen to return on equity if the debt-to-total-assets ratio decreased to 20.00 percent?(Input your answer as a percent rounded to 2 decimal places.)
9.
Jerry Rice and Grain Stores has $4,240,000 in yearly sales. The firm earns 5 percent on each dollar of sales and turns over its assets 2.5 times per year. It has $141,000 in current liabilities and $397,000 in long-term liabilities.
a.What is its return on stockholders? equity?(Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
b.If the asset base remains the same as computed in parta, 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.(Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
10.
Assume the following data for Cable Corporation and Multi-Media Inc.
Cable
Corporation
Multi-Media Inc.
Net income
$
39,000
$
171,000
Sales
381,000
2,810,000
Total assets
412,000
912,000
Total debt
189,000
499,000
Stockholders' equity
223,000
413,000
a-1.Compute return on stockholders? equity for both firms.(Input your answers as a percent rounded to 2 decimal places.)
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.)
11.
The balance sheet for Stud Clothiers is shown next. Sales for the year were $3,760,000, with 75 percent of sales sold on credit.
STUD CLOTHIERS
Balance Sheet 20X1
Assets
Liabilities and Equity
Cash
$
58,000
Accounts payable
$
254,000
Accounts receivable
356,000
Accrued taxes
163,000
Inventory
301,000
Bonds payable (long-term)
147,000
Plant and equipment
454,000
Common stock
100,000
Paid-in capital
150,000
Retained earnings
355,000
Total assets
$
1,169,000
Total liabilities and equity
$
1,169,000
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.)
.
12.
Using the income statement for Times Mirror and Glass Co., compute the following ratios:
TIMES MIRROR AND GLASS Co.
Income Statement
Sales
$
292,000
Cost of goods sold
187,000
Gross profit
$
105,000
Selling and administrative expense
47,600
Lease expense
14,800
Operating profit*
$
42,600
Interest expense
7,400
Earnings before taxes
$
35,200
Taxes (30%)
14,080
Earnings after taxes
$
21,120
*Equals income before interest and taxes.
a.Compute the interest coverage ratio.(Round your answer to 2 decimal places.)
b.Compute the fixed charge coverage ratio.(Round your answer to 2 decimal places.)
The total assets for this company equal $254,000. 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.)
d.Compute the total asset turnover ratio.(Round your answer to 2 decimal places.)
e.Compute the return on assets (investment).(Do not round interme
13.
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
20X1
$
413,000
$
2,843,000
12.2
%
20X2
451,000
3,283,000
7.7
20X3
460,000
3,773,000
4.1
Year
Debt
Total Assets
Industry Data on
Debt/Total Assets
20X1
$
1,695,000
$
2,843,000
55.5
%
20X2
1,774,000
3,283,000
49.0
20X3
1,969,000
3,773,000
34.0
a.Calculate the company's data in terms of:(Input your answers as a percent rounded to 1 decimal place.)
b.As an industry analyst comparing the firm to the industry, are you likely to praise or criticize the firm in terms of:
14.
The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting.
CANTON CORPORATION
Income Statement for 20X1
Sales
$
307,100
(16,600 units at $18.50)
Cost of goods sold
199,200
(16,600 units at $12.00)
Gross profit
$
107,900
Selling and administrative expense
18,426
Depreciation
11,600
Operating profit
$
77,874
Taxes (30%)
23,362
Aftertax income
$
54,512
a.Assume in 20X2 the same 16,600-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 $12.00 per unit. Also assume selling and administrative expense will be 6 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute aftertax income for 20X2.(Do not round intermediate calculations. Round your answer to the nearest whole number.)
b.In parta, 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.)
c.Now assume that in 20X3 the volume remains constant at 16,600 units, but the sales price decreases by 15 percent from its year 20X2 level. Also, because of FIFO inventory policy, cost of goods sold reflects the inflationary conditions of the prior year and is $12.50 per unit. Further, assume selling and administrative expense will be 6 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.)
15.
The Griggs Corporation has credit sales of $1,075,900.
Total assets turnover
2.90
times
Cash to total assets
1.30
%
Accounts receivable turnover
10
times
Inventory turnover
14
times
Current ratio
1.88
times
Debt to total assets
45
%
Using the above ratios, complete the balance sheet.(Round your answers to the nearest whole number.)
16.
Using the financial statements for the Snider Corporation, calculate the 13 basic ratios found in the chapter.
SNIDER CORPORATION
Balance Sheet
December 31, 20X1
Assets
Current assets:
Cash
$
56,800
Marketable securities
27,400
Accounts receivable (net)
196,000
Inventory
236,000
Total current assets
$
516,200
Investments
66,200
Plant and equipment.
$656,000
Less: Accumulated depreciation
220,000
Net plant and equipment
436,000
Total assets
$
1,018,400
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
91,500
Notes payable
73,900
Accrued taxes
10,700
Total current liabilities
$
176,100
Long-term liabilities:
Bonds payable
156,600
Total liabilities
$
332,700
Stockholders' equity
Preferred stock, $50 par value
$
100,000
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