Question

Ratios (Appendix)

Byers Company presents the following condensed income statement for 2016 and condensed December 31, 2016, balance sheet:

Income Statement
Sales (net)			$267,000
Less:
Cost of goods sold	$160,000
Operating expenses	62,000
Interest expense	11,000
Income taxes	10,000
Total expenses			(243,000)
Net income			$24,000

Balance Sheet
Cash	$10,000		Current liabilities	$40,000
Receivables (net)	22,000		Bonds payable, 10%	110,000
Inventory	56,000		Common stock, $10 par	100,000
Long-term investments	30,000		Additional paid-in capital	95,000
Property and equipment (net)	282,000		Retained earnings	55,000
Total Assets	$400,000		Total Liabilities and Shareholders' Equity	$400,000

Additional information:

The company's common stock was outstanding the entire year.

Dividends of $1.50 per share on the common stock were declared in 2016.

On December 31, 2016, common stock is selling for $20 per share.

On January 1, 2016, the accounts receivable (net) balance was $24,000, total assets amounted to $380,000, and total shareholders' equity was $241,000.

Of the company's net sales, 78% are on credit.

The company operates on a 365-day business year.

Required

On the basis of the preceding information, compute the following ratios for the Byers Company:

(Round to two decimal places.)

1. Earnings per share:	%
2. Gross profit margin:	%
3. Operating profit margin:	%
4. Net profit margin:	%
5. Total asset turnover:	times
6. Return on assets (Round tax rate to the nearest whole percent in your intermediate calculations.)	%
7. Return on common equity	%
8. Receivables turnover (in days): (Round your intermediate calculation to two decimal places.)	days
9. Interest coverage: (in times)	times

Answer 1

1. EPS = (Net income – preferred dividend)/ Average o/s common stock

        = (24000 - ))/10000

        = $2.4 per share

2. Gross margin ratio = Gross profit/ sales revenue

                                          = 107000/ 267000

                                          = 40.07

3. Operating profit margin = Operating income/ net sales

                                             = 45000/ 267000

                                              = 16.85%

4. Net profit margin = Net income/ total revenue

                                 = 24000/ 267000

                                 = 0.0898 or 8.98%

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Hope that helps.

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