In: Accounting
The balance sheet and income statement shown below. Note that
the firm has no amortization charges, it does not lease any assets,
none of its debt must be retired during the next 5 years, and the
notes payable will be rolled over.
Balance Sheet (Millions of $) | ||
Assets | 2019 | |
Cash and securities | $ 2,500 | |
Accounts receivable | 11,500 | |
Inventories | 16,000 | |
Total current assets | $30,000 | |
Net plant and equipment | $20,000 | |
Total assets | $50,000 | |
Liabilities and Equity | ||
Accounts payable | $ 9,500 | |
Accruals | 5,500 | |
Notes payable | 7,000 | |
Total current liabilities |
$22,000 | |
Long-term bonds | $15,000 | |
Total liabilities | $37,000 | |
Common stock | $ 2,000 | |
Retained earnings | 11,000 | |
Total common equity | $13,000 | |
Total liabilities and equity | $50,000 | |
Income Statement (Millions of $) | 2019 | |
Net sales | $87,500 | |
Operating costs except depreciation | 81,813 | |
Depreciation | 1,531 | |
Earnings bef interest and taxes (EBIT) | $ 4,156 | |
Less interest | 1,375 | |
Earnings before taxes (EBT) | $ 2,781 | |
Taxes | 973 | |
Net income | $ 1,808 | |
Other data: | ||
Shares outstanding (millions) | 500.00 | |
Common dividends | $632.73 | |
Int rate on notes payable & L-T bonds | 6.25% | |
Federal plus state income tax rate | 35% | |
Year-end stock price |
$43.39 |
What is the firm's BEP?
What is the firm's current ratio?
What is the firm's book value per share?
What is the firm's days sales outstanding? Assume a 365-day year for this calculation.
Answer:
1) The firm's BEP is calculated as
BEP = EBIT/ Total Assets
= $4,156/$50,000
= 0.08312 i.e. 8.312%
2) current ratio = Current Assets / Current
liabilities
= $30,000 / $22,000
= 1.36 times
3) Book value per share = Equity / Number of shares
outstanding
=
$13000/ 500
=
$26 per share
4) Firms Days Sales Outstanding = [Average Accounts Receivables /
Net credit Sales] * 365
= [11,500 / 87,500] * 365
= 47.97 Days in a Year
Note: Assume all net sales are credit sales