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

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

4)	Return on total assets = Net operating profit after tax/Average Total Assets = 338250*2*(1-0.30)/(857000+938800) =	26.37%
5)	Return on equity = Net income/Average equity = 225225*2/(625000+730000) =	33.24%
6)	Book value per share = Total stockholders' equity/Number of shares = 625000/171000 =	$             3.65
7)	Amount of working capital = Current Assets-Current liabilities =233500-91500 =	$     1,42,000
	Current ratio = Current assets/Current liabilities = 233500/91500 =	2.55
8)	Acid test ratio = Quick assets/Current liabilities = (54500+100000)/91500 =	1.69
9)	Accounts receivable turnover = Net sales/Average receivables = 1195000*2/(100000+71200) =	13.96
	Average collection period = 365/Accounts receivable turnover = 365/13.96 =	26	Days
10)	Inventory turnover = Cost of goods sold/Average inventory = 693100*2/(79000+100000) =	7.74
	Average sale period = 365/inventory turnover = 365/7.74 =	47	Days
11)	Operating cycle = Average sale period+Average collection period = 26+47 =	73	Days
12)	Total asset turnover = Net sales/Average total assets = 1195000*2/(857000+938800) =	1.33
13)	Debt/Equity ratio = Total debt/Stockholders' equity =232000/625000 =	37.12%
14)	Equity multiplier = Total assets/Stockholders' equity = 857000/625000 =	1.37