Question

Markus Company’s common stock sold for $2.00 per share at the end of this year. The company paid a common stock dividend of $0.42 per share this year. It also provided the following data excerpts from this year’s financial statements:     

	Ending Balance		Beginning Balance
Cash	$	30,500	$	46,000
Accounts receivable	$	52,000	$	45,000
Inventory	$	49,300	$	52,000
Current assets	$	131,800	$	143,000
Total assets	$	353,000	$	318,200
Current liabilities	$	52,500	$	37,500
Total liabilities	$	98,000	$	88,200
Common stock, $1 par value	$	111,000	$	111,000
Total stockholders’ equity	$	255,000	$	230,000
Total liabilities and stockholders’ equity	$	353,000	$	318,200

	This Year
Sales (all on account)	$	585,000
Cost of goods sold	$	339,300
Gross margin	$	245,700
Net operating income	$	75,500
Interest expense	$	4,500
Net income	$	49,700

Find:

1. return on total assets

2. return on equity

3. book value per share

4. working capital

5. current ratio

6. acid-test ratio

7. accounts receivable turnover

8. average collection period

9. inventory turnover

10. average sale period

11. operating period

12. total asset turnover

13. times interest earned ratio

Answer 1

Answer of Part 1:

Average Total Assets = (Beginning Total Assets + Ending Total Assets) /2
Average total Assets = ($318,200 + $353,000) /2
Average Total Assets = $335,600

Return on Total Assets = Net Income / Average total assets *100
Return on Total Assets = $49,700 / $335,600 *100
Return on Total Assets = 14.81%

Answer of Part 2:

Average Stockholders Equity = (Beginning Stockholders Equity + Ending Stockholder Equity) /2
Average Stockholders Equity = ($230,000 + $255,000) /2
Average Stockholders Equity = $242,500

Return on Equity = Net Income / Average Stockholders Equity *100
Return on Equity = $49,700 / $242,500 * 100
Return on Equity = 20.49%

Answer of Part 3:

No. of Common Stock = Common Stock / Par Value
No. of Common Stock = $111,000 / $1
No. of Common Stock = 111,000

Book Value per share = Total Stockholder Stock / No. of Common Stock
Book Value per share = $255,000 / 111,000
Book Value per share = $2.30

Answer of Part 4:

Working Capital = Current Assets – Current Liabilities
Working Capital = $131,800 - $52,500
Working Capital = $79,300

Answer of Part 5:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $131,800 / $52,500
Current Ratio = 2.51:1