Question

Q:

1- A company has total assets of $26 million of which the debt ratio is 50%. The company has fixed assets of $16 million, a current ratio of 2.5 times, has preferred stocks of $3 million, and reported a net income available to common stockholders of $14 milljon.
a. Calculate current liabilities.
b. Calculate common stockholders equity.
c. Calculate return on equity (ROE)

2- A firm has net sales of $9,500, cost of goods sold of $3,000, depreciation expense of $500, Interest expense $1000, Tax rate - 30%, and has 700 shares of common stock outstanding, but does not have preferred stocks. what is the value of EPS ?

3- A Palestinian corporation had cash flows from operating activities of $4,000, cash flows from financing activities of - $2,800, the balance of the cash account at the beginning of the year was $1,500, the balance of the cash account at the end of the year was $3,000, the balance of gross plant and equipment at the beginning of the year was $3,300 and the change in other fixed assets was zero.
a. Calculate cash flow from investing netivities.
b. Calculate the balance of gross plant and equipment at the end of the year.

Answer 1

Answer to Question 1:

Part a:

Total Assets = $26.00 million

Total Assets = Current Assets + Fixed Assets
$26.00 million = Current Assets + $16.00 million
Current Assets = $10.00 million

Current Ratio = Current Assets / Current Liabilities
2.50 = $10.00 million / Current Liabilities
Current Liabilities = $4.00 million

Part b:

Debt Ratio = Total Liabilities / Total Assets
0.50 = Total Liabilities / $26.00 million
Total Liabilities = $13.00 million

Total Liabilities and Stockholders’ Equity = Total Assets
Total Liabilities and Stockholders’ Equity = $26.00 million

Total Liabilities and Stockholders’ Equity = Total Liabilities + Preferred Stock + Common Stockholders’ Equity
$26.00 million = $13.00 million + $3.00 million + Common Stockholders’ Equity
Common Stockholders’ Equity = $10.00 million

Part c:

Return on Equity = Net Income available to Common Stockholders / Common Stockholders’ Equity
Return on Equity = $14.00 million / $10.00 million
Return on Equity = 1.40 or 140%