Question

Markus Company’s common stock sold for $5.50 per share at the end of this year. The company paid a common stock dividend of $0.77 per share this year. It also provided the following data excerpts from this year’s financial statements:     

	Ending Balance		Beginning Balance
Cash	$	54,500	$	47,200
Accounts receivable	$	100,000	$	71,200
Inventory	$	79,000	$	100,000
Current assets	$	233,500	$	218,400
Total assets	$	857,000	$	938,800
Current liabilities	$	91,500	$	100,500
Total liabilities	$	232,000	$	208,800
Common stock, $1 par value	$	171,000	$	171,000
Total stockholders’ equity	$	625,000	$	730,000
Total liabilities and stockholders’ equity	$	857,000	$	938,800

     

	This Year
Sales (all on account)	$	1,195,000
Cost of goods sold	$	693,100
Gross margin	$	501,900
Net operating income	$	338,250
Interest expense	$	16,500
Net income	$	225,225

rev: 05_25_2017_QC_CS-89969

4. What is the return on total assets (assuming a 30% tax rate)? (Round percentage answer to 1 decimal place. i.e., 0.123 should be considered as 12.3%)

5. What is the return on equity? (Round your answer to the nearest whole percentage place. i.e., 0.1234 should be considered as 12%.)

6. What is the book value per share at the end of this year? (Round your answer to 2 decimal places.)  

7. What is the amount of working capital and the current ratio at the end of this year? (Round "Current ratio" to 2 decimal places.)      

8. What is the acid-test ratio at the end of this year? (Round your answer to 2 decimal places.)

      

9. What is the accounts receivable turnover and the average collection period? (Use 365 days in a year. Round your intermediate and final answers to 2 decimal places.)

10. What is the inventory turnover and the average sale period? (Use 365 days in a year. Round your intermediate and final answers to 2 decimal places.

11. What is the company’s operating cycle? (Round your intermediate and final answers to 2 decimal places.)  

12. What is the total asset turnover? (Round your answer to 2 decimal places.)      

13. What is the times interest earned ratio? (Round your answer to 2 decimal place.)

14. What is the debt-to-equity ratio at the end of this year? (Round your answer to 2 decimal places.)      

15. What is the equity multiplier? (Round your answer to 2 decimal places.)      

Answer 1

	Markus Company
	Net Income	$                                                   2,25,225.00
	Less: Income Tax	$                                                       67,567.50
	Net Income after tax	$                                                   1,57,657.50
	Total Assets	$                                                   8,57,000.00
	Return on Total Assets	Net Profit after tax/Total Assets
4)	Return on Total Assets=($157657.50/$857000)	18.4%
5)	Return on Equity
	Net Income after tax	$                                                   1,57,657.50
	Total Stockholder's Equity	$                                                   6,25,000.00
	Return on Equity=($157657.50/$625000)	25%
6)	Book Value per share=Total Stockholder's Equity/Number of shares outstanding
	Total Stockholder's Equity	$                                                   6,25,000.00
	Number of Shares Outstanding	171000
	Book Value per share=(625000/171000)	$                                                                  3.65
7)	Working Capital=Current Assets-Current Liabilities
	Current Assets	233500
	Current Liabilities	232000
	Working Capital=($233500-$232000)	1500
	Current Ratio=Current Assets/Current Liabilities
	Current Ratio=($233500/$232000)	1.01	:1
8)	Acid Test Ratio=Liquid Assets/Current Liabilities
	Liquid Assets=(Current Assets-Inventory)=($233500-79000)	154500
	Current Liabilities	232000
	Acid Test Ratio=($154500/$232000)	0.67	:1
9)	Accounts Receivable Turnover=Credit Sales/Average Accounts Receivable
	Credit Sales	1195000
	Average Accounts Receivable(Beginning Accounts Receivable+Ending Accounts Receivable)/2=($100000+$71200)/2	85600
	Accounts Receivable Turnover=($1195000/$85600)	13.96
	Average Collection Period=(365/Accounts Receivable Turnover)	26.15	Days
10)	Inventory Turnover=(Cost of goods sold/Average Inventory)
	Cost of goods sold	$                                                   6,93,100.00
	Average Inventory=(Opening Inventory+Closing Inventory)/2
	Average Inventory=($100000+$79000)/2	$                                                       89,500.00
	Inventory Turnover=($693100/$89500)	7.74	Times
	Average Sales Period=365/Inventory Turnover=(365/7.74)	47.16	Days
11)	Company's Operating Cycle=
	(365/Purchases)*Average Invntories+(365/Credit Sales)*Average Accounts Receivable
	Cost of goods sold=Opening Stock+Purchases-Closing stock
	Purchases=Cost of goods sold-Opening Stock+Closing Stock=(693100-100000+79000)	672100
	(365/$672100)*89500+(365/$1195000)*85600	74.75
12)	Total Assets Turnover=Sales/Average Assets
	Sales
	Average Assets=($938800+$857000)/2	897900
	Sales	1195000
	Total Assets Turnover=($1195000/$897900)	1.33	Times
13)	Times Interest Earned Ratio=Net Income before interest and tax/Interest=(338250/16500)	20.50	Times
14)	Debt Equity Ratio=Total Liabilities/Total Shareholder's Equity=(232000/625000)	0.37
15)	Equity Multiplier=Total Assets/Total Stockholder's Equity=($857000/$625000)	1.37