Ratios (Appendix) The Byers Company presents the following condensed income stat

Question

Ratios (Appendix) The Byers Company presents the following condensed income statement for 2013 and condensed December 31, 2013 balance sheet:

Additional information: The company's common stock was outstanding the entire year. Dividends of $1.50 per share on the common stock were declared in 2013. On December 31, 2013, the common stock is selling for $20 per share. On January 1, 2013, accounts receivable (net) balance was $24,000, total assets amounted to $380,000, and the total shareholders' equity was $241,000. Of the company's net sales, 78% are on credit. The company operates on a 365-day business year.

Required On the basis of the preceding information, compute the following ratios for the Byers Company: (Round to two decimal place.)

1. Earnings per share: %

2. Gross profit margin: %

3. Operating profit margin: %

4. Net profit margin: %

5. Total asset turnover: times

6. Return on assets (Round tax rate to the nearest whole percent in your intermediate calculations.) %

7. Return on common equity %

8. Receivables turnover (in days): (Round your intermediate calculation to two decimal places.) days

9. Interest coverage: (in time) times

Explanation / Answer

Answer:

1. Earning per share : Net Income / Average outstanding common shares

                             = $ 24,000 / 100,000 = 0.24 or 24%

2. Gross profit Margin = ( Net Sales - Cost of Goods Sold ) / Net Sales

                               = $ 267,000 - $ 160,000 / $ 267,000 = 0.40 0r 40%

3. Operating Profit Margin = Operating Income / Net Sales

     first need to know Operating Income = Sales - Cost of Goods sold - Operating expenses

                                                         = $ 267,000 - $ 160,000 - $ 62,000

                                                          = $ 45,000

      Operating profit margin = $ 45,000 / $ 267,000 = 0.16 or 16%

4. Net Profit Margin = Net Income / Sales Revenue

                            = $ 24,000 / $ 267,000

                           = 0.089 or 8.9 %

5. Total asset turnover = Net Sales / Average Total Assets

                                 = $ 267,000 / ($ 380,000 / 2)

                                = $ 267,000 / $ 190,000 = 1.40

6. Return on Assets = Net Income / Average Total Assets

                             = $ 24,000 / ( $ 380,000 / 2)

                            = 0.12 or 12%

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