Question

Six Measures of Solvency or Profitability

A)The following data were taken from the financial statements of Gates Inc. for the current fiscal year.

Property, plant, and equipment (net)						$1,513,200
Liabilities:
	Current liabilities			$234,000
	Note payable, 6%, due in 15 years			1,164,000
	Total liabilities					$1,398,000
Stockholders' equity:
	Preferred $4 stock, $100 par (no change during year)					$2,097,000
	Common stock, $10 par (no change during year)					2,097,000
Retained earnings:
	Balance, beginning of year	$2,236,000
	Net income	909,000		$3,145,000
	Preferred dividends	$83,880
	Common dividends	265,120		349,000
	Balance, end of year					2,796,000
Total stockholders' equity						$6,990,000
Sales						$48,253,150
Interest expense						$69,840

Assuming that total assets were $7,969,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place.

a. Ratio of fixed assets to long-term liabilities
b. Ratio of liabilities to stockholders' equity
c. Asset turnover
d. Return on total assets	%
e. Return on stockholders’ equity	%
f. Return on common stockholders' equity	%
---------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------- B) The balance sheet for Garcon Inc. at the end of the current fiscal year indicated the following: Bonds payable, 6% $1,000,000 Preferred $5 stock, $100 par 232,000 Common stock, $15 par 234,900.00 Income before income tax was $198,000, and income taxes were $29,800, for the current year. Cash dividends paid on common stock during the current year totaled $37,584. The common stock was selling for $120 per share at the end of the year. Determine each of the following. Round answers to one decimal place, except for dollar amounts which should be rounded to the nearest whole cent. Use the rounded answers for subsequent requirements, if required. a. Times interest earned ratio times b. Earnings per share on common stock $ c. Price-earnings ratio d. Dividends per share of common stock $ e. Dividend yield % ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- C) The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $20 par value (no change during the year) $3,000,000 Preferred $4 stock, $100 par (no change during the year) 2,000,000 The net income was $290,000 and the declared dividends on the common stock were $37,500 for the current year. The market price of the common stock is $9.80 per share. For the common stock, determine (a) the earnings per share, (b) the price-earnings ratio, (c) the dividends per share, and (d) the dividend yield. If required, round your answers to two decimal places. a. Earnings per Share $ b. Price-Earnings Ratio c. Dividends per Share $ d. Dividend Yield %

Answer 1

Solution For Question A

Computation of Fixed Asset to Long term liabilities
Detail		Amount in $
Fixed Asset		1,513,200
Long term Liabilities		1164000
Sales/ Tota Asset		130%
Computation of Liability to Stock Holder Equity
Detail		Amount in $
Net Income		726540
Sales		8,221,000
Net Income / Sales		9%
Computation of Return on Total Asset
Detail		Amount in $
Net Income		909000
Total Asset		7,969,000
Net Income / Total Asset		11%
Computation of Return on Stockholder Equity
Detail		Amount in $
Net Income		909000
Stockholder's Equity		6,990,000
Net Income / Common Equity		13%
Computation of Return on Common Stockholder Equity
Detail		Amount in $
Net Income -Prefrence Dividend		825120
Common Stockholder Equity		4,893,000
Total Debt/ Total Asset		17%