Question

The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $)
Assets	2018
Cash and securities	$ 1,554.0
Accounts receivable	9,660.0
Inventories	13,440.0
Total current assets	$24,654.0
Net plant and equipment	17,346.0
Total assets	$42,000.0
Liabilities and Equity
Accounts payable	$ 7,980.0
Notes payable	5,880.0
Accruals	4,620.0
Total current liabilities	$18,480.0
Long-term bonds	10,920.0
Total debt	$29,400.0
Common stock	3,360.0
Retained earnings	9,240.0
Total common equity	$12,600.0
Total liabilities and equity	$42,000.0
Income Statement (Millions of $)	2012
Net sales	$58,800.0
Operating costs except depr'n	$54,978.0
Depreciation	$ 1,029.0
Earnings bef int and taxes (EBIT)	$ 2,793.0
Less interest	1,050.0
Earnings before taxes (EBT)	$ 1,743.0
Taxes	$     610.1
Net income	$ 1,133.0
Other data:
Shares outstanding (millions)	175.00
Common dividends	$   509.83
Int rate on notes payable & L-T bonds	6.25%
Federal plus state income tax rate	35%
Year-end stock price	$77.69

Keep two decimal places for financial ratio calculation.

firm's current ratio; 1.33

firm's quick ratio; 0.61

firm's days sales outstanding (Assume a 360-day year for this calculation.); 59.14

firm's total assets turnover; 1.4

What is the firm's inventory turnover ratio, ROA (in %, round to 2 decimal places), ROE (in %, round to 2 decimal places), profit margin (in %, round to 2 decimal places), EPS($), P/E ratio, market-to-book ratio?

Answer 1

Answer:

Note, every value is in millions

1. Inventory Turnover ratio = Sales / Inventory

= 58800 / 13440

  Inventory Turnover ratio = 4.375

2. ROA = Net income / Assets

= 1133 / 42000

ROA = 2.69%

3. ROE = Net income / Equity

= 1133 / 12600

ROE = 8.99%

4. Profit Margin = Net income / Sales

= 1133 / 58800

   Profit margin = 1.93%

5. EPS = (Net income - Dividents) / Shares outstanding

= (1133 - 509.83) / 175

EPS = $3.56

6. P/E ratio = Share price / Earning per share

= 77.69 / 3.56

   P/E = 21.82

7. Market to book ratio = Share price / Net book value per share

Net book value per share = (Total assets - Total liabilities) / Shares outstanding

= (42000 - 29400) / 175

= 12600 / 175

= 72

Market to book ratio = 77.69 / 72

= 1.08