Question

In: Accounting

You are given the following information for Smashville, Inc. Cost of goods sold: $ 259,000 Investment...

You are given the following information for Smashville, Inc.

Cost of goods sold:

$

259,000

Investment income:

$

3,100

Net sales:

$

402,000

Operating expense:

$

94,000

Interest expense:

$

7,400

Dividends:

$

11,000

Tax rate:

30

%

Current liabilities:

$

20,000

Cash:

$

21,000

Long-term debt:

$

7,000

Other assets:

$

39,000

Fixed assets:

$

134,000

Other liabilities:

$

5,000

Investments:

$

15,000

Operating assets:

$

26,000

  

During the year, Smashville, Inc., had 17,000 shares of stock outstanding and depreciation expense of $17,000. At the end of the year, Smashville stock sold for $65 per share. Calculate the price-book ratio, price-earnings ratio, and the price-cash flow ratio.

Solutions

Expert Solution

Price-book ratio = Market Price per share / Book value per share = $65 / $11.94 = 5.44

Market price per share = $ 65 (Given in question)

Book value per share = (Total assets - Total liabilities) / No. of shares outstanding = $203,000 / 17,000 = $11.94

Price-earning ratio = Market Price per share / Earnings per share = $65 / $1.84 = 35.33

Market price per share = $ 65 (Given in question)

Earnings per share = Profit available to common share holders / No. of shares outstanding = $31,290 / 17,000 = $1.84

Price-cash flow ratio = Market Price per share / Operating cashflow per share = $65 / $3.09 = 21.04

Market price per share = $ 65 (Given in question)

Operating cash flow per share = Operating cash flow per share holders / No. of shares outstanding = $52,590 / 17,000 = $3.09


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