Question

Twenty metrics of liquidity, Solvency, and Profitability

The comparative financial statements of Automotive Solutions Inc. are as follows. The market price of Automotive Solutions Inc. common stock was $66 on December 31, 20Y8.

AUTOMOTIVE SOLUTIONS INC. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7
	20Y8		20Y7
Sales	$5,409,300		$4,983,820
Cost of goods sold	(2,124,300)		(1,954,360)
Gross profit	$3,285,000		$3,029,460
Selling expenses	$(1,001,580)		$(1,264,600)
Administrative expenses	(853,200)		(742,700)
Total operating expenses	(1,854,780)		(2,007,300)
Operating income	$1,430,220		$1,022,160
Other revenue and expense:
Other income	75,280		65,240
Other expense (interest)	(360,000)		(198,400)
Income before income tax	$1,145,500		$889,000
Income tax expense	(137,500)		(107,100)
Net income	$1,008,000		$781,900

AUTOMOTIVE SOLUTIONS INC. Comparative Statement of Stockholders’ Equity For the Years Ended December 31, 20Y8 and 20Y7
	20Y8									20Y7
	Preferred Stock			Common Stock			Retained Earnings			Preferred Stock			Common Stock			Retained Earnings
Balances, Jan. 1		$950,000			$1,080,000			$4,510,450			$950,000			$1,080,000			$3,817,450
Net income								1,008,000									781,900
Dividends:
Preferred stock								(13,300)									(13,300)
Common stock								(75,600)									(75,600)
Balances, Dec. 31		$950,000			$1,080,000			$5,429,550			$950,000			$1,080,000			$4,510,450

AUTOMOTIVE SOLUTIONS INC. Comparative Balance Sheet December 31, 20Y8 and 20Y7
	Dec. 31, 20Y8		Dec. 31, 20Y7
Assets
Current assets:
Cash	$1,152,130		$1,043,070
Temporary investments	1,743,770		1,728,520
Accounts receivable (net)	1,073,100		1,007,400
Inventories	803,000		613,200
Prepaid expenses	217,976		208,610
Total current assets	$4,989,976		$4,600,800
Long-term investments	2,587,214		1,355,659
Property, plant, and equipment (net)	5,850,000		5,265,000
Total assets	$13,427,190		$11,221,459
Liabilities
Current liabilities	$1,467,640		$2,201,009
Long-term liabilities:
Mortgage note payable, 8%, due in 15 years	$2,020,000		$0
Bonds payable, 8%, due in 20 years	2,480,000		2,480,000
Total long-term liabilities	$4,500,000		$2,480,000
Total liabilities	$5,967,640		$4,681,009
Stockholders' Equity
Preferred $0.70 stock, $50 par	$950,000		$950,000
Common stock, $10 par	1,080,000		1,080,000
Retained earnings	5,429,550		4,510,450
Total stockholders' equity	$7,459,550		$6,540,450
Total liabilities and stockholders' equity	$13,427,190		$11,221,459

Determine the following measures for 20Y8. Round ratio values to one decimal place and dollar amounts to the nearest cent. For number of days' sales in receivables and number of days' sales in inventory, round intermediate calculations to the nearest whole dollar and final amounts to one decimal place. Assume there are 365 days in the year.

13. Asset turnover
14. Return on total assets		%
15. Return on stockholders’ equity		%
16. Return on common stockholders’ equity		%
17. Earnings per share on common stock	$
18. Price-earnings ratio
19. Dividends per share of common stock	$
20. Dividend yield		%

Answer 1

13. Asset Turnover = Turnover (sales) / Average total assets = 5,409,300 / (13,427,190 + 11,221,459 )= 0.21
14. Return on total assets= EBIT / Total Net assets= ( 1,430,220 + 198,400 ) / 13,427,190=0.12
15. Return on stockholders’ equity= Net income/Shareholder's equity= 1,008,000 / 7,459,550 =0.13
16. Return on common stockholders’ equity= Net income/Common stockholders equity= 1,008,000/( 950,000 + 75,600 )=0.98
17. Earnings per share on common stock= (Net income- Preferred dividend)/Common stock outstanding=(1,008,000 - 13,300) / 95,000= 10.47 Here total common stock will be Common stock value/Price of one share=950,000 / 10= 95,000shares
18. Price-earnings ratio= Stock price/Earning per share=10 / 10.47=0.95
19. Dividends per share of common stock=Dividend paid/No. of shares outstanding= 75,600 / 95,000=0.8
20. Dividend yield = Annual dividend per share/Current stock price per share=(75,600 / 95,000)/5=0.08