1.PQR, Inc. uses $ 1.2 Million in Total Assets to support it current operations.
ID: 2692371 • Letter: 1
Question
1.PQR, Inc. uses $ 1.2 Million in Total Assets to support it current operations. Its capital structure is $ 700,000 Debt and $ 150,000 in Common Stock and $ 350,00 in Retained Earmings. What is the firm's EQUITY MULTIPLIER?
2.Madrigal, Inc. had the following Income Statement for the period ending December 31, 2012: SALES 4,507 Less: CGS 2,333 GROSS PROFIT 1,874 Less: DEPN 952 EBIT 922 Less: INTEREST 196 EBT 726 Less: TAXES @ 35% 254 NI 472 What was its OPERATING CASH FLOW (OCF) for the period?
3.XYZ, Inc. has a TOTAL DEBT/ASSETS RATIO of .55. What is the firm's DEBT/EQUITY RATIO?
4.GHI, Inc. has NET WORKING CAPITAL of $ 4,050, CURRENT LIABILITIES of $8,580 and INVENTORY of $ 3640. What is the firm's CURRENT RATIO?
Explanation / Answer
1.) Equity Multiplier = Total Assets / Share holders equity Share holders equity = share capital + retained earnings - treasury shares. = $1200000 / ($150,000 + $350000) = 2.4 Assumption:(the retained earnings given $3500 but it should be $350000.Hence considered as typo mistake and taken $350000) 2)SALES 4,507 Less: CGS 2,333 GROSS PROFIT 1,874 Less: DEPN 952 EBIT 922 Less: INTEREST 196 EBT 726 Less: TAXES @ 35% 254 NI 472 What was its OPERATING CASH FLOW (OCF) for the period? The question has a mistake 4507 - 2333 = 2174 but not 1874. anyway assuming the given values the operating cash flows = 1874 - 254 = $1620 If correct values are taken,the operating cash flows = 2174 - 359 = $1815 3.) TOTAL DEBT/ASSETS RATIO of .55. i.e D/ D+E = 0.55 => D = 0.55D + 0.55E D - 0.55D = 0.55E => 0.45D = 0.55E => D/E = 0.55/0.45 = 1.222 4) Firms current ratio = Current assets /Current liabilities = (4050 + 8580 ) / 8580 = 1.472 (since Working capital = Current Assets - Current Liabilities =>Current Assets = N.W.C + C.L = 4050 + 8580)
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