Question

Hyrkas Corporation's most recent balance sheet and income statement appear below: Balance Sheet December 31, Year 2 and Year 1 (in thousands of dollars) Year 2 Year 1 Assets Current assets: Cash $ 160 $ 210 Accounts receivable, net 240 260 Inventory 210 180 Prepaid expenses 20 20 Total current assets 630 670 Plant and equipment, net 820 820 Total assets $ 1,450 $ 1,490 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 180 $ 210 Accrued liabilities 50 50 Notes payable, short term 40 40 Total current liabilities 270 300 Bonds payable 170 200 Total liabilities 440 500 Stockholders’ equity: Common stock, $2 par value 200 200 Additional paid-in capital 330 330 Retained earnings 480 460 Total stockholders’ equity 1,010 990 Total liabilities & stockholders’ equity $ 1,450 $ 1,490 Income Statement For the Year Ended December 31, Year 2 (in thousands of dollars) Sales (all on account) $ 1,220 Cost of goods sold 750 Gross margin 470 Selling and administrative expense 355 Net operating income 115 Interest expense 20 Net income before taxes 95 Income taxes (30%) 29 Net income $ 66 Dividends on common stock during Year 2 totaled $46 thousand. The market price of common stock at the end of Year 2 was $17.30 per share. Required: Compute the following for Year 2: a. Gross margin percentage. (Round your answer to 1 decimal place.) b. Earnings per share. (Round your answer to 2 decimal places.) c. Price-earnings ratio. (Do not round intermediate calculations. Round your answer to 1 decimal place.) d. Dividend payout ratio. (Do not round intermediate calculations. Round your "Percentage" answer to 1 decimal place.) e. Dividend yield ratio. (Round your "Percentage" answer to 2 decimal places.) f. Return on total assets. (Do not round intermediate calculations. Round your "Percentage" answer to 2 decimal places.) g. Return on equity. (Round your "Percentage" answer to 2 decimal places.) h. Book value per share. (Round your answer to 2 decimal places.) i. Working capital. (Input your answer in thousands of dollars.) j. Current ratio. (Round your answer to 2 decimal places.) k. Acid-test (quick) ratio. (Round your answer to 2 decimal places.) l. Accounts receivable turnover. (Round your answer to 2 decimal places.) m. Average collection period. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 1 decimal place.) n. Inventory turnover. (Round your answer to 2 decimal places.) o. Average sale period. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 1 decimal place.) p. Times interest earned ratio. (Round your answer to 2 decimal places.) q. Debt-to-equity ratio. (Round your answer to 2 decimal places.)

Answer 1

a) Gross profit margin = Gross profit /sales

=$470/$1220

=$38.5%

b) Earning per share = Net income /No. Of shares outstanding

=$66/100

=0.66 per share

c) Price earning ratio =Price per share / EPS

=$17.30/0.66

=26.2 times

d) payout ratio = Dividend per share /Earning per share

=$0.46/0.66

=69.7%

e) Dividend yield ratio = Dividend per share / market price per share

=$0.46/$17.30

=2.66%

f) Average assets = (Beginning assets+ending assets) /2

=($1450+$1490) /2

=$1470

Return on assets = Net income /Average assets

=$66/$1470

=4.49%

g) Average stock holders equity = (Beginning stockholders equity + ending stock holders equity) /2

=($1010+$990) /2

=$1000

Return on stockholders equity = Net income / Average stockholders equity

= $66/$1000

=6.6%

h) Book value per share = Shareholders equity/Total shares outstanding

=$1010/100

=$10.10 per share

I) working capital = current assets - current liabilities

=$630-$270

=$360

j) current ratio = current assets/ current liabilities

= $630/$270

=2.33 times

k) Quick assets = cash + Accounts receivable

=$160+$240 =$400

Quick ratio = Quick assets / current liabilities

=$400/$270

=1.48 times

l) Average account receivable = ( beginning account receivable + ending account receivable) /2

=($240+$260) 2

=$250

Account receivable turnover ratio = sales / average account receivables

=$1220/$250 =4.88 times

m) Average collection period = 365/Account receivable turnover ratio

=365/4.88 =74.8 days

n) Average inventory =(beginning inventory+ending inventory) /2

=($210+$180) /2 =$195

Inventory turnover ratio =COGS/average inventory

=$750/$195 =3.85 times

O) Days sales in inventory =365/inventory turnover ratio

=365/3.85 =94.8 days

p) Times interest earned ratio =EBIT /Interest expenses

=$95/$20 =4.75 times

q) Debt to equity ratio =Total debt /Total equity

=$440/$1010 =0.4356 times or 43.56%