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In: Accounting
WIPER INC. Condensed Balance Sheets December 31, 2020, 2019, 2018 (in millions) 2020 2019 2018 Current...
| WIPER INC. | |||||||||
| Condensed Balance Sheets | |||||||||
| December 31, 2020, 2019, 2018 | |||||||||
| (in millions) | |||||||||
| 2020 | 2019 | 2018 | |||||||
| Current assets | $ | 681 | $ | 906 | $ | 753 | |||
| Other assets | 2,415 | 1,922 | 1,721 | ||||||
| Total assets | $ | 3,096 | $ | 2,828 | $ | 2,474 | |||
| Current liabilities | $ | 566 | $ | 805 | $ | 712 | |||
| Long-term liabilities | 1,521 | 995 | 842 | ||||||
| Stockholders’ equity | 1,009 | 1,028 | 920 | ||||||
| Total liabilities and stockholders' equity | $ | 3,096 | $ | 2,828 | $ | 2,474 | |||
| WIPER INC. | ||||||
| Selected Income Statement and Other Data | ||||||
| For the year Ended December 31, 2020 and 2019 | ||||||
| (in millions) | ||||||
| 2020 | 2019 | |||||
| Income statement data: | ||||||
| Sales | $ | 3,052 | $ | 2,915 | ||
| Operating income | 298 | 312 | ||||
| Interest expense | 86 | 67 | ||||
| Net income | 197 | 192 | ||||
| Other data: | ||||||
| Average number of common shares outstanding | 41.5 | 46.9 | ||||
| Total dividends paid | $ | 52.0 | $ | 52.5 | ||
Required:
- Calculate return on investment, based on net income and average total assets, for 2020 and 2019.
- Calculate return on equity for 2020 and 2019.
- Calculate working capital and the current ratio for each of the past three years.
- Calculate earnings per share for 2020 and 2019.
- If Wiper's stock had a price/earnings ratio of 12 at the end of 2020, what was the market price of the stock?
- Calculate the cash dividend per share for 2020 and the dividend yield based on the market price calculated in part e.
- Calculate the dividend payout ratio for 2020.
- Assume that accounts receivable at December 31, 2020, totaled $311 million. Calculate the number of days' sales in receivables at that date.
- Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019.
- Calculate the times interest earned ratio for 2020 and 2019.
Solutions
Expert Solution
Solution-
| 2020 | 2019 | ||
| Return on investment | 6.65% | 7.24% | |
| Net income/Average total assets | 197/2,962 | 192/2651 | |
| Average total assets | (3096+ 2828)/2 | (2828+ 2474)/2 | |
| 2,962 | 2,651 | ||
| 2020 | 2019 | ||
| Return on equity | 19.34% | 19.71% | |
| Net income/Average stockholders' equity | 197/1018.5 | 192/974 | |
| Average stockholders' equity | (1009+ 1028)/2 | (1028+ 920)/2 | |
| 1018.5 | 974 | ||
| 2020 | 2019 | 2018 | |
| Working capital | 115 | 101 | 41 |
| Current ratio | 1.20 | 1.12 | 1.05 |
| Working capital = CA - CL | 681-566 | 906-805 | 753-712 |
| Current ratio = CA/CL | 681/566 | 906/805 | 753/712 |
| 2020 | 2019 | ||
| Earnings per share | 4.74 | 4.09 | |
| Net income/Average number of common shares outstanding | 197/41.5 | 192/46.9 | |
| Market price | $56.88 | ||
| Price/earnings ratio = Market price/EPS | |||
| 12= Market price/4.74 | |||
| Market price = 12 x 4.74 = 56.88 | |||
| Cash dividends per share | $1.25 | ||
| Dividend yield | 2.19% | ||
| Cash dividends per share | |||
| $52.0/41.5= 1.25 | |||
| Dividend yield = Dividends paid/Market price | |||
| $1.25/$56.88= 2.19% | |||
| Dividend payout ratio | 26.39% | ||
| Dividends paid / Net income | |||
| $52.0/ 197= 26.39% | |||
| Number of days sales | 37.20days | ||
| Accounts receivable/Average daily credit sales | |||
| $311/($3052/365 days) = 37.20 | |||
| 2020 | 2019 | ||
| Debt ratio | 67.40% | 63.65% | |
| Debt/equity ratio | 2.06% | 1.75% | |
| Debt ratio | |||
| Total debt/Total assets |
2087/3096 (1521+566)/3096 |
1800/2828 (995+805)/2828 |
|
| Debt/equity ratio | |||
| Total debt / Total stockholders' equity | 2087/1009 | 1800/1028 | |
| 2020 | 2019 | ||
| Times interest earned | 3.46times | 4.65times | |
| Profit before interest & tax / Interest | 298/86 | 312/67 |
ekkarill92 answered 10 months agoRelated Solutions
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