Question
In: Accounting
Presented here are summarized data from the balance sheets and income statements of Wiper Inc.: WIPER...
Presented here are summarized data from the balance sheets and income statements of Wiper Inc.:
| WIPER INC. | |||||||||
| Condensed Balance Sheets | |||||||||
| December 31, 2020, 2019, 2018 | |||||||||
| (in millions) | |||||||||
| 2020 | 2019 | 2018 | |||||||
| Current assets | $ | 734 | $ | 959 | $ | 813 | |||
| Other assets | 2,421 | 1,928 | 1,727 | ||||||
| Total assets | $ | 3,155 | $ | 2,887 | $ | 2,540 | |||
| Current liabilities | $ | 585 | $ | 838 | $ | 731 | |||
| Long-term liabilities | 1,555 | 1,015 | 883 | ||||||
| Stockholders’ equity | 1,015 | 1,034 | 926 | ||||||
| Total liabilities and stockholders' equity | $ | 3,155 | $ | 2,887 | $ | 2,540 | |||
| WIPER INC. | ||||||
| Selected Income Statement and Other Data | ||||||
| For the year Ended December 31, 2020 and 2019 | ||||||
|
(in millions) |
||||||
| 2020 | 2019 | |||||
| Income statement data: | ||||||
| Sales | $ | 3,058 | $ | 2,921 | ||
| Operating income | 304 | 318 | ||||
| Interest expense | 92 | 73 | ||||
| Net income | 215 | 210 | ||||
| Other data: | ||||||
| Average number of common shares outstanding | 42.1 | 47.5 | ||||
| Total dividends paid | $ | 58.0 | $ | 53.1 | ||
Required:
- Calculate return on investment, based on net income and average total assets, for 2020 and 2019.
- Calculate return on equity for 2020 and 2019.
- Calculate working capital and the current ratio for each of the past three years.
- Calculate earnings per share for 2020 and 2019.
- If Wiper's stock had a price/earnings ratio of 13 at the end of 2020, what was the market price of the stock?
- Calculate the cash dividend per share for 2020 and the dividend yield based on the market price calculated in part e.
- Calculate the dividend payout ratio for 2020.
- Assume that accounts receivable at December 31, 2020, totaled $317 million. Calculate the number of days' sales in receivables at that date.
- Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019.
- Calculate the times interest earned ratio for 2020 and 2019.
Solutions
Expert Solution
| A) Calculate return on investment, based on net income and average total assets, for 2020 and 2019. | |||
| Amount in $ millions | |||
| 2020 | 2019 | ||
| Net Income (A) | 215 | 210 | |
|
Average Total Assets (B) (Refer to Working Note 1) |
3,021 | 2,714 | |
| Return on Investments( A/B) | 7.12% | 7.74% | |
| B) Calculate return on equity for 2020 and 2019. | |||
| Amount in $ millions | |||
| 2020 | 2019 | ||
| Net Income (A) | 215 | 210 | |
|
Average Stockholders’ equity(B) (Refer to Working Note 2) |
1,025 | 980 | |
| Return on Equity (A/B) | 20.99% | 21.43% | |
| C) Calculate working capital and the current ratio for each of the past three years. | |||
| Amount in $ millions | |||
| 2020 | 2019 | 2018 | |
| Current assets (A) | 734 | 959 | 813 |
| Current liabilities (B) | 585 | 838 | 731 |
| Working Capital ( A - B) | 149 | 121 | 82 |
| Current Ratio ( A / B ) | 1.25 | 1.14 | 1.11 |
| D) Calculate earnings per share for 2020 and 2019. | |||
| Amount in $ millions | |||
| 2020 | 2019 | ||
| Net Income (A) | 215 | 210 | |
| Average number of common shares outstanding(B) | 42.1 | 47.5 | |
| Earning per Share (A/B) (in $) | 5.11 | 4.42 | |
| E) If Wiper's stock had a price/earnings ratio of 13 at the end of 2020, what was the market price of the stock? | |||
| 2020 | |||
| Earning per Share (in $) (A) as calculated above | 5.11 | ||
| Price Earning Ratio (B) | 13 | ||
| Market Price of Stock ( A X B ) | 66.38 | ||
| F) Calculate the cash dividend per share for 2020 and the dividend yield based on the market price calculated in part e. | |||
| Amount in $ millions | |||
| 2020 | |||
| Average number of common shares outstanding (A) | 42.1 | ||
| Total dividends paid (B) | 58 | ||
| Market Price of Stock ( C ) as calculated above ( in $ ) | 66.38 | ||
| Cash Dividend per Share (D = A/B ) (in $ ) | 1.38 | ||
| Dividend Yield | 2.08% | ||
| G) Calculate the dividend payout ratio for 2020. | |||
| Cash Dividend per Share (A) (in $ ) as calcuated above | 1.38 | ||
| Earning per Share (B) (in $) as calculated above | 5.11 | ||
| Divident Payout Ratio ( A / B ) | 26.98% | ||
| H) Assume that accounts receivable at December 31, 2020, totaled $317 million. Calculate the number of days' sales in receivables at that date. | |||
| Amount in $ millions | |||
| 2020 | |||
| Sales (A) | 3,058 | ||
| Account Receivable (B) | 317 | ||
| Days Sales Outstanding (B / A) X 365 | 37.84 | ||
| I) Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019. | |||
| Amount in $ millions | |||
| 2020 | 2019 | ||
| Total assets (A) | 3155 | 2887 | |
| Current liabilities (B) | 585 | 838 | |
| Long-term liabilities ( C ) | 1555 | 1015 | |
| Total Liabilities ( D = B + C) | 2140 | 1853 | |
| Stockholders’ equity ( E ) | 1015 | 1034 | |
| Debt Ratio ( D / A ) | 0.68 | 0.64 | |
| Debt Equity Ratio (D/E) | 2.11 | 1.79 | |
| J) Calculate the times interest earned ratio for 2020 and 2019 | |||
| Amount in $ millions | |||
| 2020 | 2019 | ||
| Interest expense (A) | 92 | 73 | |
| Net income (B) | 215 | 210 | |
| Times Interest Earned Ratio ( B / A) | 2.34 | 2.88 | |
| Working Notes | |||
 ekkarill92 answered 1 year agoRelated SolutionsPresented here are summarized data from the balance sheets and income statements of Wiper, Inc.: WIPER,...Presented here are summarized data from the balance sheets and
income statements of Wiper, Inc.:
WIPER, INC.
Condensed Balance Sheets
December 31, 2017, 2016, 2015
(in millions)
2017
2016
2015
Current assets
$
829
$
1,071
$
933
Other assets
2,433
1,940
1,739
Total assets
$
3,262
$
3,011
$
2,672
Current liabilities
$
597
$
850
$
752
Long-term liabilities
1,638
1,115
982
Stockholders’ equity
1,027
1,046
938
Total liabilities and
stockholders' equity
$
3,262
$
3,011
$
2,672...
Presented here are summarized data from the balance sheets and income statements of Wiper, Inc.: WIPER,...
Presented here are summarized data from the balance sheets and
income statements of Wiper, Inc.:
WIPER, INC.
Condensed Balance Sheets
December 31, 2017, 2016, 2015
(in millions)
2017
2016
2015
Current assets
$
707
$
939
$
793
Other
assets
2,419
1,926
1,725
Total
assets
$
3,126
$
2,865
$
2,518
Current
liabilities
$
583
$
836
$
724
Long-term
liabilities
1,530
997
870
Stockholders’
equity
1,013
1,032
924
Total
liabilities and stockholders' equity
$
3,126
$
2,865
$
2,518...
Presented here are summarized data from the balance sheets and income statements of Wiper Inc.: WIPER...Presented here are summarized data from the balance sheets and
income statements of Wiper Inc.:
WIPER INC.
Condensed Balance Sheets
December 31, 2020, 2019, 2018
(in millions)
2020
2019
2018
Current assets
$
798
$
1,031
$
893
Other assets
2,429
1,936
1,735
Total assets
$
3,227
$
2,967
$
2,628
Current liabilities
$
593
$
846
$
748
Long-term liabilities
1,611
1,079
946
Stockholders’ equity
1,023
1,042
934
Total liabilities and stockholders' equity
$
3,227
$
2,967
$
2,628...
Presented here are summarized data from the balance sheets and income statements of Wiper Inc.: WIPER...Presented here are summarized data from the balance sheets and
income statements of Wiper Inc.:
WIPER INC.
Condensed Balance Sheets
December 31, 2020, 2019, 2018
(in millions)
2020
2019
2018
Current assets
$
722
$
949
$
803
Other assets
2,420
1,927
1,726
Total assets
$
3,142
$
2,876
$
2,529
Current liabilities
$
584
$
837
$
730
Long-term liabilities
1,544
1,006
874
Stockholders’ equity
1,014
1,033
925
Total liabilities and stockholders' equity
$
3,142
$
2,876
$
2,529...
Presented here are summarized data from the balance sheets and income statements of Wiper Inc.: WIPER...Presented here are summarized data from the balance sheets and
income statements of Wiper Inc.:
WIPER INC.
Condensed Balance Sheets
December 31, 2020, 2019, 2018
(in millions)
2020
2019
2018
Current assets
$
798
$
1,031
$
893
Other assets
2,429
1,936
1,735
Total assets
$
3,227
$
2,967
$
2,628
Current liabilities
$
593
$
846
$
748
Long-term liabilities
1,611
1,079
946
Stockholders’ equity
1,023
1,042
934
Total liabilities and stockholders' equity
$
3,227
$
2,967
$
2,628...
Presented here are summarized data from the balance sheets and income statements of Wiper, Inc.: WIPER,...Presented here are summarized data from the balance sheets and
income statements of Wiper, Inc.:
WIPER, INC.
Condensed Balance Sheets
December 31, 2017, 2016, 2015
(in millions)
2017
2016
2015
Current assets
$
707
$
939
$
793
Other assets
2,419
1,926
1,725
Total assets
$
3,126
$
2,865
$
2,518
Current liabilities
$
583
$
836
$
724
Long-term liabilities
1,530
997
870
Stockholders’ equity
1,013
1,032
924
Total liabilities and stockholders' equity
$
3,126
$
2,865
$
2,518...
The information presented here represents selected data from the December 31, 2016, balance sheets and income...The information presented here represents selected data from the
December 31, 2016, balance sheets and income statements for the
year then ended for three firms.
Required:
Calculate the missing amounts for each firm.
Firm A
Firm B
Firm C
Total assets, 12/31/16
$348,000
$416,000
Total liabilities,
12/31/16
64,000
164,000
Paid-in capital, 12/31/16
44,000
47,200
112,000
Retained earnings,
12/31/16
148,800
Net income for 2016
54,400
88,000
64,800
Dividends declared and paid
during 2016
9,600
22,400
Retained earnings, 1/1/16
40,000
99,200
Hypothetical balance sheets of Nike, Inc. are presented here.Hypothetical balance sheets of Nike, Inc. are presented here. (a) Prepare a horizontal analysis of the balance sheet data for Nike, using 2021 as a base. If amount and percentage are a decrease show the numbers as negative, es -55,000, -20% or (55,000). (20%). Round percentages to 1 decimal place, es. 12.5%) b) Prepare a vertical analysis of the balance sheet data for Nike for 2022 NIKE
Hypothetical balance sheets of Nike, Inc. are presented here.Hypothetical balance sheets of Nike, Inc. are presented here. NIKE, INC. Condensed Balance Sheet May 31 ($ in millions) (a) Prepare a horizontal analysis of the balance sheet data for Nike, using 2021 as a base. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000).(20%). Round percentages to 1 decimal place, eg. 12.5%.) NIKE, INC. Condensed Balance Sheet May 31 ($ in millions) (b) Prepare a vertical analysis of the balance sheet data for Nike for...
Suppose the comparative balance sheets of Nike, Inc. are presented here. Nike, Inc. Comparative Balance Sheets...Suppose the comparative balance sheets of Nike,
Inc. are presented here.
Nike, Inc.
Comparative Balance Sheets
May 31
($ in millions)
2020
2019
Assets
Current assets
$ 9,379
$ 8,300
Property, plant, and equipment (net)
1,836
1,700
Other assets
1,536
1,600
Total assets
$12,751
$11,600
Liabilities and Stockholders’ Equity
Current liabilities
$ 3,267
$ 3,300
Long-term liabilities
1,358
1,400
Stockholders’ equity
8,126
6,900
Total liabilities and stockholders’ equity
$12,751
$11,600
(a)
Prepare a horizontal analysis of the balance sheet data...
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