Question
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 |
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Current assets: |
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Cash | 17,631 | 14,588 |
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Accounts receivable | 41,019 | 35,258 |
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Inventory | 71,505 | 65,567 |
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Net plant and equipment | 498,421 | 477,413 |
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Total assets | $628,576 | $592,826 |
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Current liabilities: |
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|
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Accounts payable | 63,073 | 55,653 |
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Notes payable | 25,324 | 21,895 |
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Long-term debt | 62,000 | 58,000 |
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Common stock and paid-in surplus | 60,000 | 60,000 |
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Accumulated retained earnings | 418,179 | 397,278 |
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Total liabilities and owners equity | 628,576 | $592,826 |
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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 |
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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
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