Question

In: Accounting

10. Toe following information pertains to Alladin Corporation as of and for the year-ended Decemb.er 31r...

10. Toe following information pertains to Alladin Corporation as of and for the year-ended Decemb.er 31r 2013. Liabilities p 60,000 Stockholders' equity p 500,000 Shares of common stock issued and outstanding 10 000 Net income p '30 000 During 2013, Alladin officers exerc1sea stock options for 1,000 shares of stock at an option price of PB per share. What was the effect of exercising the stock option?

a. No ratios were affected.

c. Debt to equity ratio decreased to 12%.

b. Asset turnover increased to 50.4%

d. Earnings per share increased by P0.33

11. The Mermaid Corporation's common stock is currently selling at PlO0 per share, which represents a P/E ratio of 10. If the firm has 100 shares of common stock outstanding, a return on equity of 20 percent, and a debt ratio of 60 percent, what is its return on total assets (ROA)?

a. 8.0%

b. 10.0%

c. 12.0%

d. 16.7%

12. Selected data from the year-end financial statements of Kurro International. are presented below. difference between average and ending inventories Is immaterial. Current ratio Quick ratio Current liabilities Inventory turnover (based on cost of sales) Gross profit margin Kurro International net sales for the year were a. P2.4 million b. P4.0 million c. Pl.2 million 2.0 1.5 P600,000 8 times 40% d. P6.0 million The 13. Mercury Corporation computed the following items from its financial records for the year just ended: Price-earnings ratio 12 Payout ratio .6 Asset turnover .9 The dividend yield on Mercury's common stock is

a. 5.0%

B. 7.2%

C. 7.5%

D. 10.8%

13. Mercury Corporation computed the following items from its financial records for the year just ended: Price-earnings ratio 12 Payout ratio .6 Asset turnover .9 The dividend yield on Mercury's common stock is

A. 5.0%

B. 7.2%

C. 7.5%

D. 10.8%

Expert Solution

10) Answer would be option c. Whenever the new share issued or stock options excercised, the debt equity ratio would be decreased.

11) Answer would be option a.

ROA = Profit after tax / Average total asset = 1000/12500 = 8%

Working Notes :-

1) PE Ratio = 10

Share price / EPS = 10

100/EPS = 10

EPS = 10

Profit after Tax / No. of share outstanding = 10

Profit after tax / 100 = 10

Profit after tax = 1000

2) ROE = 20%

Profit after Tax/ shareholders equity = 20%

Shareholders Equity = 5000

Total Assets - Total Liabilities = 5000

Total Assets = 5000 + Total Liabilities

Debt Ratio = Total Liablities / Total Assets

0.6 = Total Liablities / 5000 + Total Liabilities

3000 + 0.6 * Total Liabilities = Total Liabilities

0.4 * Total Liabilities = 3000

Total Liabilites = 7500

Total Assets = 12500

12) Information seems to be inappropriate

13 ) Answer would be option a.

Dividend Yield = Payout ratio/PE Ratio

= 0.6/12

= 5%

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