Question

Ratios Compared with Industry Averages
Packard Plastics, Inc., manufactures various plastic and synthetic products. Financial statement data for the firm follow:

	2013 (Thousands of Dollars, Except Earnings per Share)
Sales revenue	$896,500
Cost of goods sold	594,000
Net income	55,550
Dividends	15,400
Earnings per share	4.04

Packard Plastics, inc. Balance Sheets (Thousands of Dollars)
	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash	$4,510	$2,700
Accounts receivable (net)	73,590	60,900
Inventory	148,000	140,000
Total Current Assets	219,000	203,600
Plant assets (net)	215,000	194,000
Other assets	5,300	3,900
Total Assets	$439,300	$401,500
Liabilities and Stockholders' Equity
Notes payable-banks	$34,100	$25,000
Accounts payable	30,360	23,000
Accrued liabilities	25,100	24,800
Total Current Liabilities	83,700	72,800
10% Bonds payable	150,000	150,000
Total Liabilities	233,700	222,800
Common stock, $10 par value (12,500,000 shares)	125,000	125,000
Retained earnings	80,600	53,700
Total Stockholders' Equity	205,600	178,700
Total Liabilities and Stockholders' Equity	$439,300	$401,500

Required
a. Using the given data, calculate items 1 through 8 below for 2013 for Packard Plastics, Inc.

Round all answers to two decimal places.

	Median Ratios for Manufacturers of Plastic and Synthetic Products		Ratios for Packard Plastics
1. Quick ratio:	1.20		Answer
2. Current ratio:	1.90		Answer
3. Accounts Receivable Turnover:	7.90		Answer
4. Inventory turnover:	7.80		Answer
5. Debt-to-equity ratio:	0.95		Answer
6. Gross profit percentage	32.70	%	Answer	%
7. Return on sales	3.50	%	Answer	%
8. Return on assets:	6.30	%	Answer	%

b. Calculate the dividends paid per share of common stock. (Note: Number of shares shown on balance sheet is not shown in thousands. The number of shares "in thousands" is 12,500.)
Round answers to two decimal places.
$Answer

What was the dividend payout ratio?
Answer

%

c. If the most recent price per share of common stock is $48.75, what is the price-earnings ratio?
Round answers to two decimal places.
Answer

The dividend yield?
Answer

%

Answer 1

Answer : (a.) Calculation ofQuick Ratio

1.)Quick Ratio = [Cash + Accounts Receivable] / Total Current Liabilities

= [4510 + 73590] / 83700

= 0.93

2.) Current Ratio = Total Current assets / Total Current Liabilities

= 219000 / 83700

= 2.62

3.) Accounts Receivable Turnover Ratio = Net Credit Sales / Average Receivables

= 896500 / [(73590 + 60900) / 2 ]

= 896500 / 67245

= 13.33

4.) Inventory Turnover Ratios = Net Credit Purchase / Average Inventory

   = 594000 / [(148000 + 140000) / 2 ]

= 594000 / 144000

  = 4.125

5.) Debt to equity ratio =Total Liability / Equity

= 233700 / 205600

= 1.14

6.) Gross Profit % = Gross Profit / Sales

= (Sales - COGS) / 896500

= (896500 - 594000) / 896500

= 0.3374 or 33.74%

7.) Return on Sales = Net Income / Sales

= 55550 / 896500

= 0.062 or 6.20%

8.) Return on Assets = Net Income / Average Total Assets

= 55550 / [(439300 + 401500)/2]

= 13.21%

(b.) Calculation of Dividend paid per share = Dividend / Number of shares outstanding

= 15400 / 12500

= 1.232 or 1.23

Dividend Payout Ratio = Dividend / Net Income

= 15400 / 55550

= 27.72%

(c.) Calculation of Price Earning Ratio

Price Earning Ratio = Current Price / Earning Per share

= 48.75 / 4.04

= 12.07

Dividend Yield = Dividend per share / Current Price

= 1.232 / 48.75

= 2.52% or 2.53%