Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Use the information in the table below to calculate the following ratios. Discuss the results to compare the financial positions of the two firms: Complete

Use the information in the table below to calculate the following ratios. Discuss the results to compare the financial positions of the two firms:

Complete the empty frames in the following table and show your work below (identify calculations by letter). For example, Spalings interest expense can be inferred from EBIT and Times interest earned, since TIE = EBIT / Interest expense.

Calculation for A:

EBIT = 300,000, TIE = 30, so 30 = 300,000 / Interest expense, and Interest expense = 300,000 / 30 = 10,000

Spaling

Preston

EBIT (Earnings before interest and taxes)

300,000

190,000

Interest expense

A

15,000

Net income

200,000

J

Dividend payout ratio

35%

K

Retention ratio

B

60%

Dividends declared during the year

C

40,000

Sales

3,000,000

L

Average assets during the year

D

1,500,000

Average debt during the year

700,000

M

Average shareholders equity during the year

1,800,000

N

Asset turnover ratio

E

1.3333

Debt ratio

F

0.3333=1/3

Return on sales

G

0.095

Return on assets

0.12

O

Return on equity

H

0.10

Market price per share, beginning of year

20

P

Market price per share, end of year

15

20

Total shareholder return

I

0.1556

Number of shares outstanding

150,000

50,000

Times interest earned

30

Q

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

The Handbook Of Portfolio Mathematics

Authors: Vince

1st Edition

0471757683, 978-0471757689

More Books

Students also viewed these Finance questions