question archive C) Use information in the below table to compute the following ratios for 2002
C) Use information in the below table to compute the following ratios for 2002
Subject:FinancePrice:2.86 Bought12
C) Use information in the below table to compute the following ratios for 2002.
|
a: Current ratio |
b: Quick ratio |
c: Account Receivable turnover |
|
d: Debt to Equity |
e: Return on equity |
f: Gross Profit margin |
|
g: Earnings per share |
h: Market Price per Share |
|
In Dollars |
2002 |
2001 |
|
Sales |
800,000 |
600,000 |
|
Cost of goods sold |
600,000 |
500,000 |
|
Net income |
90,000 |
75,000 |
|
Cash |
75,000 |
55,000 |
|
Account Receivable |
87,000 |
81,000 |
|
Inventories |
65,000 |
75,000 |
|
Fixed Assets |
20,000 |
18,000 |
|
Current Liabilities |
54,810 |
51,000 |
|
Long term Liabilities |
50,000 |
25,000 |
|
Shareholder’s Equity |
179,690 |
120,000 |
|
Preferred dividends |
0 |
0 |
|
Shares of common stocks |
150,000 |
150,000 |
|
Price-Earnings ratio (P/E) |
3.0 |
2.8 |
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Answer of Part a:
Current Assets = Cash + Accounts Receivable + Inventory
Current Assets = $75,000 + $87,000 + $65,000
Current Assets = $227,000
Current Ratio = Current Assets /Current Liabilities
Current Ratio = $227,000 / $54,810
Current Ratio = 4.14:1
Answer of Part b:
Quick Ratio = (Current Assets – Inventory) / Current Liabilities
Quick Ratio = ($227,000 - $65,000) / $54,810
Quick Ratio = $162,000 / $54,810
Quick Ratio = 3:1
Answer of Part c:
Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable)/2
Average Accounts Receivable = ($81,000 + $87,000)/2
Average Accounts Receivable = $84,000
Accounts Receivable Turnover = Sales / Average Accounts Receivable
Accounts Receivable Turnover = $800,000 / $84,000
Accounts Receivable Turnover = 9.52 times
Answer of Part d:
Total Debt = Current Liabilities + Long term Liabilities
Total Debt = $54,810 + $50,000
Total Debt = $104,810
Debt to Equity = Total Debt / Total Equity
Debt to Equity = $104,810 / $179,690
Debt to Equity = 0.58
Answer of Part e:
Average Shareholder Equity = (Beginning Shareholder Equity + Ending Shareholder Equity)/2
Average Shareholder Equity = ($120,000 + $179,690)/2
Average Shareholder Equity = $149,845
Return on Equity = Net Income / Average Shareholder Equity *100
Return on Equity = $90,000 / $149,845 *100
Return on Equity = 60.06%
Answer of Part f:
Gross Profit = Sales – Cost of Goods Sold
Gross Profit = $800,000 - $600,000
Gross Profit = $200,000
Gross Profit Margin = Gross Profit / Sales *100
Gross Profit Margin = $200,000 / $800,000 *100
Gross Profit Margin = 25%
