A variety of financial ratios and measures are provided about one of the auto co

Question

A variety of financial ratios and measures are provided about one of the auto companies and its stock.
These are incomplete, however, so some additional information will have to be computed.
Specifically, we know the following:

Net profit margin: 15%
Total assets: $25 billion
Earnings per share: $3.00
Total asset turnover: 1.5
Net working capital: $3.4 billion
Payout ratio: 40%
Current liabilities: $5 billion
Price-to-earnings ratio: 12.5

Given this information, calculate the following:
1. Sales
2. Net profits after taxes
3. Current ratio
4. Market price of the stock
5. Dividend yield

Explanation / Answer

1. Sales:

Total asset turnover: 1.5 = Sales / Total assets

Total assets: $25 billion, then Sales = $25 billion * 1.5 = $37.5 billion

2. Net profits after taxes= Sales * Net profit margin = $37.5 billion * 15% = $5.625 billion

3. Current ratio :

Current Assets = Net Working Capital + Current Liabilities = 3.4 billion + 5 billion = 8.4 billion

So, Current ratio = Current assets / Current liabilities = 8.4 / 5 = 1.68

4. Market price of the stock :

Price-to-earnings ratio: 12.5 = market price / EPS

Earnings per share: $3.00, Then, Market price of the stock = 12.5 * $3 = $37.5

5. Dividend yield = Annual Dividend / Market price of the stock

= 3 * 0.40 / $37.5 = 3.2%

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