1. You decide first to assess the company\'s performance in terms of debt manage
ID: 2418894 • Letter: 1
Question
1. You decide first to assess the company's performance in terms of debt management and profitabil final percentage answers to 1 decimal place. Lo., 0.123 should be considered as 12.3%. Round the rest of the intermediate calculations and final answers to 2 decimal places.) a. The times interest earned ratio. b. The debt-to-equ c. The gross margin percentage. ity ratio. d. The return on total assets. (Total assets at the beginning of last year were $13,060,000.) d The rotum on totasets at the beginning of last yoar were $13,060,000,) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $8,357,600. There has been no change in common stock over the last two years.) f is the company's financial leverage positive or negative? b.Explanation / Answer
Answer :
Answer 1 Particulars This year Last year The Time Interest earned ratio 4.01 5.78 Debt to Equity Ratio 0.82 0.68 Gross Margin Percentage 20.00 % 25.00 % Return on total assets 4.83 % 7.33 % Return on equity 8.48 % 11.90 % Financial Leverage Positive Positive Working Notes The Time Interest earned ratio '= EBIT/Interest exp. This year '=1466000/366000 '=4.01 Last Year '=1770000/306000 '=5.78 Debt to Equity Ratio '= total Liab/total equity This year '=7660000/9300000 '=0.82 Last Year '=6020000/8870000 '=0.68 Gross Margin Percentage '=Gross Margin/net sales*100 This year '=3170000/15850000*100 '=20% Last year '=3370000/13480000 '=25% Return on total assets Net Income/Total Average assets Return on equity Net Income/Share holders Equity Financial Leverage Debt Ratio Total liab/total asset Equity/total asset Answer 2 Particulars This year Last year The Earning Per Share 7.70 10.25 The Dividend yield ratio 3.70 % 8.54 % The Dividend Payout ratio 44.16 % 50.00 % Price Earning Ratio 11.95 5.85 Book Value per share 93.00 88.70 Working Notes The Earning Per Share '= Net Income/average no. of common stock The Dividend yield ratio '= Cash dividend per share/Market value per share The Dividend Payout ratio '=total dividends/net income Price Earning Ratio Market Price per share/ EPS Book Value per share Share holder equity/no. Of share Answer 3 Particulars This year Last year Working Capital 3460000.00 2890000.00 The Current Ratio 1.87 1.98 Acid Test Ratio 0.90 1.10 The Average collection Period 50 Days 46 Days The Average Sales Period 145 Days 136 Days The operation Cycle 137 Days 126 Days Total asset turn over 1.00 1.66 Working Notes Working Capital Current Asset- Current liab Current Ratio Current Asset/ Current liab Acid Test Ratio Current asset-inventory-prepaid exp/current liab The Average collection Period No. of working days/debtor turnover Total asset turn over Net Sales/average assetRelated Questions
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