8 Hyrkas Corporation\'s most recent balance sheet and income statement appear be

Question

8 Hyrkas Corporation's most recent balance sheet and income statement appear below: Balance Sheet December 31, Year 2 and Year 1 (in thousands of dollars) Year 2 Year 1 Assets Current aaaeta: Cash Accounts receivable, net Inventory Prepaid expenscs 420 390 20 1,080 1,360 $2,440 $ 250 390 440 360 20 1,210 1,540 $2,750 Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Current liabilitics: $ 360 50 40 450 350 800 $ 390 50 40 480 635 1,115 Accou nts payable Accrued liabilities Notes payable, short term Total current liabilities Bonds payable Total liabilities Stockholders' equity: Common stock, $2 par value Additional paid-in capital Retained earnings 200 330 1,110 ,640 $2,440 200 330 Total stockholders' equity Total liabilities stockholders. 1,635 $2,750 equity

Explanation / Answer

Calculation of ratios of year 2 (All amts are in thousands of dollars)

d) Dividend Payout Ratio = (Dividends paid/Net Income)*100

= ($9/$14)*100 = 64.3%

e) Dividend Yield Ratio = Dividend per share/Market price per share

Dividend per share = Total Dividend/No. of shares = ($9/100) = $0.09

Dividend Yield Ratio = $0.09/$3.00 = 0.03 or 3%

f) Return on Total Assets = Net Income/Average Total Assets

Average Total Assets = (Year 1 Total Assets+Year 2 Total Assets)/2

= ($2,750+$2,440)/2 = $$5,190/2 = $2,595

Return on Total Assets = $14/$2,595 = 0.54%

g) Return on Equity = Net Income/Average Stockholder's Equity

Average Stockholder's Equity = (Year 1 Stockholder's Equity+Year 2 Stockholder's Equity)/2

= ($1,635+1,640)/2 = $3,275/2 = $1,637.50

Return on Equity = $14/$1,637.50 = 0.85%

h) Book Value per share = Total Stockholder's Equity of year 2/No. of shares outstanding

No. of shares outstanding = $200/$2 par value = 100 thousands shares

Book Value per share = $1,640/100 = $16.4 per share

i) Working Capital = Total Current Assets - Total Current Liabilities

= $1,080 - $450 = $630

j) Current Ratio = Total Current Assets/Total Current Liabilities

= $1,080/$450 = 2.4

k) Acid Test Ratio = Liquid Assets/Current Liabilities

Liquid Assets = Current Assets - Prepaid Expenses - Inventory

= $1,080 - $20 - $390 = $670

Acid Test Ratio = $670/$450 = 1.49

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