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Ratios: Answer the following questions. a. Galaxy Sales has sales of $746,700, cost of goods sold...

Ratios: Answer the following questions.

a. Galaxy Sales has sales of $746,700, cost of goods sold of $603,200, and inventory of $94,300. How long on average does it take the firm to sell its inventory?

b. Goshen Industrial Sales has sales of $828,900, total equity of $539,200, a profit margin of 4.6 percent and a debt-equity ratio of 0.55. What is the return on assets?

c. Freedom Health Centers has total equity of $861,300, sales of $1.48 million, and a profit margin of 5.2 percent. What is the return on equity?

d. The Green House has a profit margin of 5.6 percent on sales of $311,200. The firm currently has 15,000 shares of stock outstanding at a market price of $11.60 per share. What is the price-earnings ratio?

e. Computer Geeks has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity?

f. Hoagland Corp's stock price at the end of last year was $33.50, and its book value per share was $25.00. What was its market/book ratio?

Solutions

Expert Solution

Answer of Part a:

Inventory Turnover = Cost of Goods Sold / Inventory
Inventory Turnover = $603,200 / $94,300
Inventory Turnover = 6.40

Days Sales in Inventory = 365 days / Inventory Turnover
Days Sales in Inventory = 365 / 6.40
Days Sales in Inventory = 57.03 days

Answer of Part b:

Return on Assets = (Profit Margin * Sales) / [(1+Debt Equity ratio) * total equity] *100
Return on Assets = (0.046 * $828,900) /[(1+0.55) * $539,200] *100
Return on Assets = $38,129.4 / $835,760 *100
Return on Assets = 4.56%

Answer of Part c:

Profit Margin = Net Income / Sales
0.052 = Net Income / $1,480,000
Net Income = 0.052 * $1,480,000
Net Income = $76,960

Return on Equity = Net Income / Total Equity *100
Return on Equity = $76,960 / $861,300 *100
Return on Equity = 8.94%

Answer of Part d:

Profit Margin = Net Income / Sales
0.056 = Net Income / $311,200
Net Income = 0.056 * $311,200
Net Income = $17,427.2

Earnings Per Share = Net Income / No.of Common Stock
Earnings Per Share = $17,427.2 / 15,000
Earnings Per Share = $1.16

Price Earnings Ratio = Market Price / Earnings Per Share
Price Earnings Ratio = $11.60 / $1.16
Price Earnings Ratio = 10


jeff jeffy answered 2 years ago
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