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	$978,000
Cost of goods sold	648,000
Net income	60,600
Dividends	16,800
Earnings per share	4.04

Packard Plastics, inc. Balance Sheets (Thousands of Dollars)
	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash	$4,920	$2,700
Accounts receivable (net)	80,280	60,900
Inventory	177,600	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	$37,200	$25,000
Accounts payable	33,120	23,000
Accrued liabilities	30,120	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 $49.75, what is the price-earnings ratio?
Round answers to two decimal places.
Answer

The dividend yield?
Answer%

Answer 1

Ans:

1. Quick ratio= Quick Assets/ Current Liabilities

Quick Assets= Total Current Assets- Prepaid expenses-Inventory

Quick Assets= 219,000-177,600

Quick Assets= 41,400

Ratio= 41,400/83,700

Ratio= 0.49:1

2. Current Ratio= Current Assets/Current Liabilities

Current ratio= 219,000/83,700

Current ratio= 2.61:!

3. Accounts Receivable turnover= Net Credit Sales/ Average accounts receivable

Ratio= 978,000/{80,280+60,900}/2

Ratio= 978,000/141,180/2

Ratio= 978,000/70,590

Ratio= 13.85 times

4. Inventory turnover= COGS/Average Inventory

Ratio= 648,000/{177,600+141,000}/2

Ratio= 648,000/159,300

Ratio= 4.06 times

5. Deb to equity ratio= Total liabilities/Stockholder equity

Ratio= 233,700/205,600

Ratio= 1.13 times

6. Gross Profit%= Gross profit/net Sales*100

Ratio= Sales-cost of goods sold/Net Sales*100

Ratio= {978,000-648,000}/978,000*100

Ratio= 330,000/978,000*100

Ratio= 33.74%

7. Return on Sales= net income/net Sales

=> 60,600/978,000*100

Ratio = 6.19%

8. Return on Assets= Net income/Average total Assets

=> 60,600/{439,300+401,500}/2

=> 60,600/420,400*100

=> 14.41%

B). Dividend per Share= Dividend paid/ Number of shares

=> 16,800/12,500

=> 1.344 per share

C). Dividend payout Ratio= Dividend paid/Net income

=> 16,800/60,600*100

=> 27.72%

D). Price-earnings ratio= Market value per share/Earnings per share

=> 49.75/4.04

=> 12.31

Dividend yield= annual dividend per share/current price per share

Dividend yield= 1.344/49.75*100

=> 2.70%