My TU-Towson Univensity CHAPTER 3 work ng with Finans @Soled Matet wk e Ratos. A

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My TU-Towson Univensity CHAPTER 3 work ng with Finans @Soled Matet wk e Ratos. A × |+ ezto.mheducation.com/hm.tpx SMOLIRA GOLF, INC Balance Sheets as of December 31, 2015 and 2016 2015 2016 2015 2016 Assets Current assets Cument iabilties Cash Accounts receivable 2.941 2857 Accounts payable 2,198 2,690 2,206 4,722 5,691 Notes payable 1,795 658 13692 Ot Other Total $20 321 22240 Ttal 2,240 5012 $14.200 16,960 ,090 Long-term debt Owners equity $42.500 42500 9.769 $58,199 $82,269 576.491 $104 241 Common stock and paid-in surplus Accumulated retained eamings Fixed assets 15,699 Net plant and equipment56 170 Total asset:s Total $76,491 $104241 ities and owners' euity 01 RA GOLF Cost of goods sold $189,170 127.103 EBIT nterest paid Taxable income Taxes 40 55.484 Net income 36.065 Drnidends Retained eaming 11,996 24,070 Smolira Golf has 11,000 shares of common stock outstanding, and the market price for a share of stock at the end of 2016 was $86 What is the price-earnings ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) Price-earnings ratio trres What is the price-saes ratio? (Do not round intermediate ealculations and round your answer to 2 decimal places, e.g., 32.16.) Price-sales ratio tres What are the dvidends per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g- 32.16) Dividends per share What is the market-to-book ratio at the end of 20167 (Do not round intermediate calcuíations and round your answer to 2 decimal places, e.g. 32 Market-to-book rato imes Firefox aubomatially sends some data to Mozila se thait we can improve your operience

Explanation / Answer

Solution:     

1. The Smolira Golf Inc.’s P/E Ratio for 2016:

The Price Earnings ratio is calculated as follows = (Market value per share / Earnings per share)

As per the information given we have market price per share = $ 86

The Earnings for the year 2016 = $ 36,065

The number of shares of the company = 11000

Thus Earnings per share = (Earnings after tax / No. of shares) = ( $ 36,065 / 11,000 ) = 3.2786

Applying the above information in the formula for P/E Ratio we have

P/E Ratio for the year 2016 = (86/ 3.2786) = 26.2304

= 26.23 ( when rounded off to two decimal places)        

2. The Smolira Golf Inc.’s Price to sales ratio for 2016:

The price to sales ratio is calculated as follows:

= Market capitalization / Sales during the year

As per the information given the question we have market price per share = $ 86.

The number of shares of the company = 11,000                                                           

Thus the Market capitalization or market value of the company = 11,000 * $ 86 = $ 946,000 (A)

As per the information given in the question we have Sales during the year 2016= $ 189,170 (B)

Thus, Price to sales ratio = (A)/(B) = $ 946,000 / $ 189,170 = 5.0008

= 5.00 ( when rounded off to two decimals)

3. The Smolira Golf Inc.’s Dividend per share for 2016:

The dividend per share is calculated as follows = Total dividend paid / No. of shares outstanding

As per the information given the question we have total amount of dividend paid = $ 11,995

The number of shares of the company = 11,000

Thus the Dividend per share = $ 11,995 / 11,000 = $ 1.0905

= $ 1.09 ( when rounded off to two decimals)

4.The Smolira Golf Inc.’s Market to Book ratio at the end of 2016 :

The market to book value ratio is calculated as follows = (Market value / Book value)

Here the market value is the market capitalization = Market value per share * No. of shares of the company

Book value is = Total assets – Total liabilities – Preference shares – Intangible assets.

As per the information given the question we have market price per share = $ 86.

The number of shares of the company = 11,000

Thus the Market capitalization or market value of the company = 11,000 * $ 86 = $ 946,000 (A)

Further as per the information in the question :

Total assets = $ 104,241 ; Total liabilities = Current liabilities + Long term debt = $ 5,012 + $ 16,960 = $ 21,972

Preferred shares = Nil ; Intangible assets = Nil

Thus, book value of the company = $ 104,241 – $ 21,972 = $ 82,269   (B)

Thus the market to book value ratio = (A)/(B) = $ 946,000 / $ 82,269 = 11.4989

= 11.50 ( when rounded off to two decimals)

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