Given a firm\'s balance sheet and income statement, as indicated below, answer t
ID: 2664757 • Letter: G
Question
Given a firm's balance sheet and income statement, as indicated below, answer the questions that follow.XYZ Corporation Balance Sheet
Assets
Cash $43,000,000
Accounts Receivable $85,000,000
Inventories $200,000,000
Total Current Assets $328,000,000
Fixed Assets $150,000,000
Total Assets $478,000,000
Liabilities and Equity
Accounts / Notes Payable $95,000,000
Accruals $50,000,000
Total Current Liabilities $145,000,000
Long-Term Debt $100,000,000
Common Stock $80,000,000
Retained Earnings $60,000,000
Total Liabilities and Equity $385,000,000
XYZ Corporation Income Statement
Sales $950,000,000
Cost of Goods Sold $700,000,000
Selling, General, and Administrative Expense $100,000,000
Depreciation $120,000,000
EBIT $30,000,000
Taxes $10,500,000.00
Net Income $19,500,000.00
XYZ Corporation Ticker Info
Shares Outstanding 2,000,000
Last Closing Price $30
A What is the firm's quick ratio?
B What is the firm's current ratio?
C What is the firm's return on equity?
D What is the firm's inventory turnover?
E What is the firm's price to earnings ratio?
F What is the firm's debt ratio?
Explanation / Answer
(A) What is the firm’s Quick Ratio?
Quick Ratio = [(Current Assets – Inventory) / Current Liabilities]
Current Assets = $328,000,000
Current Assets – Inventory = [$328,000,000 - $200,000,000]
Current Assets – Inventory = $128,000,000
Current Liabilities = $145,000,000
Quick Ratio = [$128,000,000 / $145,000,000]
Quick Ratio = 0.88 times
(B) What is the firm’s Current Ratio?
Current Ratio = [Current Assets / Current Liabilities]
Current Ratio = [$328,000,000 / $145,000,000]
Current Ratio = 2.26 times
(C) What is the Firm’s Return on Equity?
Return on Equity = [Net Income / Total Equity]
Net Income = $19,500,000
Total Equity = [Common Stock + Retained Earnings]
Total Equity = [$80,000,000 + $60,000,000]
Total Equity = $140,000,000
Return on Equity = [$19,500,000 / $140,000,000]
Return on Equity = 0.1393 (or) 13.93%
Return on Equity = 13.93%
(D) What is the firm’s Inventory Turnover?
Inventory Turnover = [Cost of Goods Sold / Inventory]
Cost of Goods Sold = $700,000,000
Inventory = $200,000,000
Inventory Turnover = [$700,000,000 / $200,000,000]
Inventory Turnover = 3.5 times
(E) What is the firm’s price to earnings ratio?
Price-earnings ratio = [Price per share / Earnings per share]
Price per share = $30
Earnings per share = [Net Income / Shares Outstanding]
Earnings per share = [$19,500,000 / 2,000,000]
Earnings per share = $9.75
Price-earnings ratio = [$30 / $9.75]
Price-earnings ratio = 3.077 times
(F) What is the firm’s debt ratio?
Debt Ratio = [(Total Assets – Total Equity) / Total Assets]
Debt Ratio = [($385,000,000 - $140,000,000) / $385,000,000]
Debt Ratio = 0.64 times
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