Markus Company’s common stock sold for $2.75 per share at the end of this year.
ID: 2536495 • Letter: M
Question
Markus Company’s common stock sold for $2.75 per share at the end of this year. The company paid a common stock dividend of $0.55 per share this year. It also provided the following data excerpts from this year’s financial statements
1. What is the return on total assets (assuming a 30% tax rate)? (Round percentage answer to 1 decimal place. i.e., 0.123 should be considered as 12.3%)
2. What is the return on equity? (Round your answer to the nearest whole percentage place. i.e., 0.1234 should be considered as 12%)
3. What is the book value per share at the end of this year? (Round your answer to 2 decimal places.)
4. What is the average collection period? (Use 365 days in a year. Round your intermediate and final answers to 2 decimal places.)
5. What is the equity multiplier? (Round your answer to 2 decimal places.)
6. What is the debt-to-equity ratio at the end of this year? (Round your answer to 2 decimal places.)
7. What is the times interest earned ratio? (Round your answer to 1 decimal place.)
8. What is the total asset turnover? (Round your answer to 2 decimal places.)
9. What is the company’s operating cycle? (Round your intermediate and final answers to 2 decimal places.)
10. What is the average sale period? (Use 365 days in a year. Round your intermediate and final answers to 2 decimal places.)
Please Answer all the questions.
Markus Company’s common stock sold for $2.75 per share at the end of this year. The company paid a common stock dividend of $0.55 per share this year. It also provided the following data excerpts from this year’s financial statements
Explanation / Answer
Solution 1
Return on total assets (assuming a 30% tax rate)
= *Net Profit after Tax / Average Total assets ** X 100
=$ 92,400 / $455,000 X 100
=20.3% (Answer)
*Net Profit after
The net income given in question is already after tax. So, that will be used for calculation.
=Net operating income- Interest expense
=$ 140,000 - $ 8,000
= $ 132,000
Tax = 30 % of $ 132,000 = $ 39,600
Net Income (after tax) = $ 132,000- $ 39,600 = $ 92,400
**Average Total assets
= (Beginning Assets + Ending Assets) /2
= ($450,000 + $460,000)/2
= $455,000
Solution 2
Return on equity
= Net Income / Average stockholders’ equity X100
= $ 92,400 / ($ 340,000 + $ 320,000 /2) X 100
=$ 92,400 /$ 330,000 X 100
= 28% (Answer)
Solution 3
Book value per share at the end of this year
= Total stockholders’ equity / Number of common shares
= $ 320,000/ ($ 120,000/ $ 1)
=$ 320,000/ 12000 shares
=$ 26.67 (Answer)
Solution 4
Average collection period
= 365/ *Receivable turnover ratio
= 365 /12.72
=28.69 (Answer)
*Receivable turnover ratio
= Net Sales / Average accounts receivables
=$ 700,000/ ($50,000 + $ 60,000)/2
=$ 700,000/ $ 55,000
=12.72
Solution 5
Equity multiplier
= Total assets / Total stockholder's equity
= $ 450,000/ $ 320,000
=1.41 (Answer)
Solution 6
Debt-to-equity ratio
= Total liabilities / Total stockholder's equity
=$ 130,000 / $ 320,000
= 0.41 (Answer)
Solution 7
Times interest earned ratio
=Income before interest and taxes /Interest expense
=$ 140,000 / $ 8,000
= 17.5 (Answer)
Solution 8
Total asset turnover
=Net sales / Average total assets
= $ 700,000 / ($460,000 + $ 450,000)/2
= $ 700,000 / $ 455,000
=1.54 (Answer)
Solution 9
Company’s operating cycle
= Days' Sales of Inventory + Days Sales Outstanding
= (365 / Cost of goods sold X *Average inventory) + (365 / Credit sales X **Average accounts receivable)
= (365 /$ 4, 00,000 X$ 57,500) + (365 / $ 700,000 X $ 55,000)
= 52.47 + 28.68
=81.15 (Answer)
*Average inventory= ($ 60,000 + $ 55,000) / 2 =$ 57,500
**Average accounts receivable= ($ 50,000 + $ 60,000) / 2 =$ 55,000
Solution 10
Average sale period
= 365/ *Inventory turnover ratio
= 365 /6.96
=52.44 (Answer)
*Receivable turnover ratio
= Cost of goods sold / Average inventory
=$ 400,000/ ($60,000 + $ 55,000)/2
=$ 400,000/ $ 57,500
=6.96
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