Presented here are summarized data from the balance sheets and income statements

Question

Presented here are summarized data from the balance sheets and income statements of Wiper, Inc.:

Required:

a. Calculate return on investment, based on net income and average total assets, for 2017 and 2016. (Do not round intermediate calculations. Round your answers to 1 decimal place.)

b. Calculate return on equity for 2017 and 2016. (Round your answers to 1 decimal place.)

c. Calculate working capital and the current ratio for each of the past three years. (Enter your answers in millions (i.e., 5,000,000 should be entered as 5). Round "Current ratio" to 1 decimal place.)

d. Calculate earnings per share for 2017 and 2016. (Round your answers to 2 decimal places.)

e. If Wiper's stock had a price/earnings ratio of 15 at the end of 2017, what was the market price of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

f. Calculate the cash dividend per share for 2017 and the dividend yield based on the market price calculated in part e. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

g. Calculate the dividend payout ratio for 2017. (Do not round intermediate calculations.)

h. Assume that accounts receivable at December 31, 2017, totaled $319 million. Calculate the number of days' sales in receivables at that date. (Use 365 days a year. Do not round intermediate calculations.)

i. Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2017 and 2016. (Round "Debt ratio" to 1 decimal place and "Debt/equity ratio" to the nearest whole percent.)

j. Calculate the times interest earned ratio for 2017 and 2016. (Round your answers to 1 decimal place.)

WIPER, INC. Condensed Balance Sheets December 31, 2017, 2016, 2015 (in millions) 2017 2016 2015 Current assets $ 759 $ 971 $ 833 Other assets 2,423 1,930 1,729 Total assets $ 3,182 $ 2,901 $ 2,562 Current liabilities $ 587 $ 840 $ 733 Long-term liabilities 1,578 1,025 901 Stockholders’ equity 1,017 1,036 928 Total liabilities and stockholders' equity $ 3,182 $ 2,901 $ 2,562

Explanation / Answer

a. 2017 2016 Return on investment 7.3% 7.9% Net income/Average total assets 221/3041.5 216/2731.5 Average total assets (3182 + 2901)/2 (2901 + 2562)/2 3041.5 2731.5 b. 2017 2016 Return on equity 21.5% 22.0% Net income/Average stockholders' equity 221/1026.5 216/982 Average stockholders' equity (1017 + 1036)/2 (928 + 1036)/2 1026.5 982 c. 2017 2016 2015 Working capital 172 131 100 Current ratio 1.3 1.2 1.1 Working capital = CA - CL 759-587 971-840 833-733 Current ratio = CA/CL 759/587 971/840 833/733 d. 2017 2016 Earnings per share 5.22 4.53 Net income/Average number of common shares outstanding 221/42.3 216/47.7 e. Market price $78.3 Price/earnings ratio = Market price/EPS 15 = Market price/5.22 Market price = 15 x 5.22 = 78.3 f. Cash dividends per share $1.42 Dividend yield 1.81% Cash dividends per share $60.0/42.3 = 1.42 Dividend yield = Dividends paid/Market price $1.42/$78.3 = 1.81% g. Dividend payout ratio 27.15% Dividends paid / Net income $60.0 / 221 = 27.15% h. Number of days sales 38.05 days Accounts receivable/Average daily credit sales $319/($3060/365 days) = 38.05 i. 2017 2016 Debt ratio 68.0% 64.3% Debt/equity ratio 213% 180% Debt ratio Total debt/Total assets 2165/3182 1865/2901 Debt/equity ratio Total debt / Total stockholders' equity 2165/1017 1865/1036 j. 2017 2016 Times interest earned 3.3 times 4.3 times Profit before interest & tax / Interest 306/94 320/75

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