Question

Hyrkas Corporation's most recent balance sheet and income statement appear below:

Balance Sheet
December 31, Year 2 and Year 1
(in thousands of dollars)
	Year 2			Year 1
Assets
Current assets:
Cash	$	180		$	250
Accounts receivable, net		280			300
Inventory		250			220
Prepaid expenses		20			20
Total current assets		730			790
Plant and equipment, net		940			980
Total assets	$	1,670		$	1,770
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	220		$	250
Accrued liabilities		50			50
Notes payable, short term		40			40
Total current liabilities		310			340
Bonds payable		210			300
Total liabilities		520			640
Stockholders’ equity:
Common stock, $2 par value		200			200
Additional paid-in capital		330			330
Retained earnings		620			600
Total stockholders’ equity		1,150			1,130
Total liabilities & stockholders’ equity	$	1,670		$	1,770

Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account)	$	1,320
Cost of goods sold		820
Gross margin		500
Selling and administrative expense		395
Net operating income		105
Interest expense		20
Net income before taxes		85
Income taxes (30%)		26
Net income	$	59

Dividends on common stock during Year 2 totaled $39 thousand. The market price of common stock at the end of Year 2 was $14.40 per share.

Required:

Compute the following for Year 2:

a. Gross margin percentage. (Round your answer to 1 decimal place.)

b. Earnings per share. (Round your answer to 2 decimal places.)

c. Price-earnings ratio. (Do not round intermediate calculations. Round your answer to 1 decimal place.)

d. Dividend payout ratio. (Do not round intermediate calculations. Round your "Percentage" answer to 1 decimal place.)

e. Dividend yield ratio. (Round your "Percentage" answer to 2 decimal places.)

f. Return on total assets. (Do not round intermediate calculations. Round your "Percentage" answer to 2 decimal places.)

g. Return on equity. (Round your "Percentage" answer to 2 decimal places.)

h. Book value per share. (Round your answer to 2 decimal places.)

i. Working capital. (Input your answer in thousands of dollars.)

j. Current ratio. (Round your answer to 2 decimal places.)

k. Acid-test (quick) ratio. (Round your answer to 2 decimal places.)

l. Accounts receivable turnover. (Round your answer to 2 decimal places.)

m. Average collection period. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 1 decimal place.)

n. Inventory turnover. (Round your answer to 2 decimal places.)

o. Average sale period. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 1 decimal place.)

p. Times interest earned ratio. (Round your answer to 2 decimal places.)

q. Debt-to-equity ratio. (Round your answer to 2 decimal places.)

Answer 1

a. Gross margin percentage = Gross Profit / Sales = 500 / 1320 = 37.88%

b. Earnings per share. = Net Income / Number of outstanding shares = 59 / 100 = $0.59

c. Price-earnings ratio. = Market Price / Earnings per share = $14.40 / $0.59 = 24.41

d. Dividend payout ratio. = Dividend per share / Earnings per share = ( 39/100 ) / $0.59 = 66.1%

e. Dividend yield ratio. = Dividend per share / Market Price = $0.39 / $14.40 = 2.71%

f. Return on total assets. = Net Income / Avg. Total Assets = 59 / ( 1670 + 1770 ) / 2 = 59 / 1720 = 3.43%

g. Return on equity = Net Income / Avg. Total Equity = 59 / ( 1150 + 1130 ) / 2 = 59 / 1140 = 5.18%

h. Book value per share = Total Equity / Number of outstanding shares = 1150 / 100 = $11.50

i. Working capital. = Current Assets - Current Liabilities = 730 - 310 = 420

j. Current ratio = Current Assets / Current Liabilities = 730 / 310 = 2.35

k. Acid-test (quick) ratio. = Quick assets / Current Liabilities = (180 +280 ) / 310 = 1.48

l. Accounts receivable turnover = Sales / Avg. Accounts Receivable = 1320 / ( 280 + 300 ) / 2 = 1320 / 290 = 4.55

m. Average collection period = 365 / Accounts receivable turnover = 365 / 4.55 = 80.22 Days

n. Inventory turnover = Cost of goods sold / Avg. Inventory = 820 / ( 250 + 220 ) / 2 = 820 / 235 = 3.49

o. Average sale period = 365 / Inventory turnover = 365 / 3.49 = 104.58 Days

p. Times interest earned ratio = Net operating income / Interest expense = 105 / 20 = 5.25 times

q. Debt-to-equity ratio. = Total Liabilities / Total Equity = 520 / 1150 = 0.45