Question

Quantitative Problem: Rosnan Industries' 2018 and 2017 balance sheets and income statements are shown below. Balance Sheets: 2018 2017 Cash and equivalents $80 $65 Accounts receivable 275 300 Inventories 375 350 Total current assets $730 $715 Net plant and equipment 2,000 1,490 Total assets $2,730 $2,205 Accounts payable $150 $85 Accruals 75 50 Notes payable 130 155 Total current liabilities $355 $290 Long-term debt 450 290 Common stock 1,225 1,225 Retained earnings 700 400 Total liabilities and equity $2,730 $2,205 Income Statements: 2018 2017 Sales $2,000 $1,500 Operating costs excluding depreciation 1,250 1,000 EBITDA $750 $500 Depreciation and amortization 100 75 EBIT $650 $425 Interest 62 45 EBT $588 $380 Taxes (40%) 235 152 Net income $353 $228 Dividends paid $53 $48 Addition to retained earnings $300 $180 Shares outstanding 100 100 Price $25.00 $22.50 WACC 10.00% What is the firm’s 2018 current ratio? Round your answer to two decimal places. If the industry average debt-to-total-assets ratio is 30%, then Rosnan’s creditors have a cushion than indicated by the industry average. What is the firm’s 2018 net profit margin? Round your answer to four decimal places. % If the industry average profit margin is 12%, then Rosnan’s lower than average debt-to-total-assets ratio might be one reason for its high profit margin. What is the firm’s 2018 price/earnings ratio? Round your answer to two decimal places. Using the DuPont equation, what is the firm’s 2018 ROE? Round your answer to two decimal places. %

Answer 1