Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

For Questions 8 through 10 , use the information provided below concerning Allied Business Solutions, Inc. (ABS) in fiscal year (FY) 2050 and FY 2051.

For Questions 8 through 10, use the information provided below concerning Allied Business Solutions, Inc. (ABS) in fiscal year (FY) 2050 and FY 2051.

ABS Inc., balance sheets:

FYE 2051

FYE 2050

Current assets:

Cash

17,631

14,588

Accounts receivable

41,019

35,258

Inventory

71,505

65,567

Net plant and equipment

498,421

477,413

Total assets

$628,576

$592,826

Current liabilities:

Accounts payable

63,073

55,653

Notes payable

25,324

21,895

Long-term debt

62,000

58,000

Common stock and paid-in surplus

60,000

60,000

Accumulated retained earnings

418,179

397,278

Total liabilities and owners equity

628,576

$592,826

ABS Inc., incomes statement:

FY 2051

Sales revenues

Cost of goods sold

SG&A

EBIT

Interest expenses

Net income

730,200

495,000

85,000

150,200

42,000

86,560

ABS Inc., the share information at the end of fiscal year (FYE) 2051:

The number of shares outstanding: 200,000 shares

Price per share: $10

Question 8

Determine the following financial ratios for ABS Inc. in FY 2051: i) NWC ratio, ii) total debt to assets ratio, iii) debt-to-equity ratio, and iv) interest coverage ratio (based on EBIT), rounded to four decimal places (e.g., 0.78715= 0.7872).

Question 9

For FY 2051, (i) calculate ABS Inc.s return on equity (ROE). Additionally, (ii) decompose ROE into three pieces of information (i.e., DuPont analysis). Provide all numbers in four decimal places (e.g., 0.78715= 0.7872).

Question 10 [5 marks]

Which of the following statements is correct? Choose only one.

A) Relative to market to book ratio, Tobins Q is more difficult to construct because it requires the estimate of the historical costs of the firms assets.

B) ABS Inc.s inventory turnover ratio for FY 2051 (based on FYE balance, not FY average) is 71,505/495,000=0.144.

C) ABS Inc.s price to earnings (P/E) at FYE 2051 is 0.4328/10=0.04328.

D) The DuPont analysis suggests that compared with its ROA, ABS Inc.s ROE is lowered by its financial leverage.

E) None of the above

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Enterprise Compliance Risk Management An Essential Toolkit For Banks And Financial Services

Authors: Saloni Ramakrishna

1st Edition

1118550285, 978-1118550281

More Books

Students also viewed these Accounting questions