Question
QUESTION 1 Based on the information in Table 4-2, and assuming the company's stock price is $50 per share, the M/B ratio is Table 4-2
QUESTION 1
Based on the information in Table 4-2, and assuming the company's stock price is $50 per share, the M/B ratio is
Table 4-2
Drummond Company
Balance Sheet
Assets: | |
Cash and marketable securities | $400,000 |
Accounts receivable | 1,415,000 |
Inventories | 1,847,500 |
Prepaid expenses | 24,000 |
Total current assets | 3,686,500 |
Fixed assets | 2,800,000 |
Less: accum. depr. | (1,087,500) |
Net fixed assets | 1,712,500 |
Total assets | $5,399,000 |
Liabilities: | |
Accounts payable | $600,000 |
Notes payable | 875,000 |
Accrued taxes | 92,000 |
Total current liabilities | $1,567,000 |
Long-term debt | 900,000 |
Common Stock (100,000 shares) | 700,000 |
Retained Earnings | 2,232,000 |
Total liabilities and owner's equity | $5,399,000 |
Income Statement | |
Net sales (all credit) | $6,375,000 |
Less: Cost of goods sold | (4,375,000) |
Selling and administrative expense | (1,000,000) |
Depreciation expense | (135,000) |
Interest expense | (100,000) |
Earnings before taxes | $765,000 |
Income taxes | (306,000) |
Net income | $459,000 |
10.89. | ||
1.71 | ||
2.44 | ||
1.50 |
QUESTION 2 Based on the information in Table 4-2, the Debt Ratio is
46.69% | ||
40.24% | ||
32.88% | ||
30.33% |
QUESTION 3
Based on the information in Table 4-2, the acid-test ratio is
1.17. | ||
1.33. | ||
1.39 | ||
2.15 |
QUESTION 4
Based on the information in Table 4-2, the return on equity is
19.33% | ||
18.47% | ||
16.66% | ||
15.65% |
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