On December 31, 2017, Ainsworth, Inc., had 540 million shares of
common stock outstanding. Twenty four million shares of 5%, $100
par value cumulative, nonconvertible preferred stock were sold on
January 2, 2018. On April 30, 2018, Ainsworth purchased 30 million
shares of its common stock as treasury stock. Twelve million
treasury shares were sold on August 31. Ainsworth issued a 5%
common stock dividend on June 12, 2018. No cash dividends were
declared in 2018. For the year ended December 31, 2018, Ainsworth
reported a net loss of $160 million, including an after-tax loss
from discontinued operations of $440 million.
Required:
1. Compute Ainsworth's net loss per share for the
year ended December 31, 2018.
2. Compute the per share amount of income or loss
from continuing operations for the year ended December 31,
2018.
3. Prepare an EPS presentation that would be
appropriate to appear on Ainsworth's 2018 and 2017 comparative
income statements. Assume EPS was reported in 2017 as $0.85, based
on net income (no discontinued operations) of $459 million and a
weighted-average number of common shares of 540 million..
REQUIRED 1&2
Compute Ainsworth's net loss per share for the year ended December 31, 2018 and the per share amount of income or loss from continuing operations for the year ended December 31, 2018. (Round your intermediate calculations to 2 decimal places.Negative amounts should be indicated by a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
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REQUIRED 3
Prepare an EPS presentation that would be appropriate to appear on Ainsworth's 2018 and 2017 comparative income statements. Assume EPS was reported in 2017 as $0.85, based on net income (no discontinued operations) of $459 million and a weighted-average number of common shares of 540 million. (Round your answers to 2 decimal places. Loss amounts should be indicated with a minus sign.)
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Edwards Co. includes one coupon in each bag of dog food it sells. In return for 4 coupons, customers receive a dog toy that the company purchases for £1.20 each. Edwards's experience indicates that 60 percent of the coupons will be redeemed. During 2018, 100,000 bags of dog food were sold, 12,000 toys were purchased, and 50,000 coupons were redeemed. During 2019, 120,000 bags of dog food were sold, 16,000 toys were purchased, and 60,000 coupons were redeemed.
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Sanders Co. includes one coupon in each bag of cat food it sells. In return for 4 coupons, customers receive a teddy bear that the company purchases for $1.20 each. Sanders's experience indicates that 60 percent of the coupons will be redeemed. During 2018, 100,000 bags of cat food were sold, 12,000 teddy bears were purchased, and 50,000 coupons were redeemed. During 2019, 120,000 bags of cat food were sold, 16,000 teddy bears were purchased, and 60,000 coupons were redeemed.
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Chris Gumede was recently hired by S&S Air to assist the company with its financial planning and to evaluate the company’s performance. Chris graduated from university five years ago with a finance degree.
S&S Air was founded 10 years ago by friends Mark and Thandi. The company has manufactured and sold light aeroplanes over this period and the company’s products have received high reviews for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and fly their own aeroplanes. The company has two models, the Birdie which sells for R2 530 000 and the Eagle which sells for R5 780 000.
While the company manufactures aircraft, its operations are different from commercial aircraft companies. S&S Air builds aircraft to order. By using prefabricated parts, the company is able to complete the manufacture of an aeroplane in only five weeks. The company also receives a deposit on each order, as well as another partial payment before the order is complete. In contrast, a commercial aeroplane may take one and a half to two years to manufacture once the order is placed.
Mark and Thandi have provided the following financial statements. Chris has gathered the industry ratios for the light aeroplane manufacturing industry.
S&S Air
2018 Financial Statements
| Income Statement | |
| Sales | R128 700 000 |
| Cost of goods sold | 90 700 000 |
| Other expenses | 15 380 000 |
| Depreciation | 4 200 000 |
| PBIT | 18 420 000 |
| Interest | 2 315 000 |
| PBT | 16 105 000 |
| Tax (40%) | 6 442 000 |
| NPAT | R 9 663 000 |
| Dividends | 2 898 900 |
| Add to retained profits | 6 764 100 |
| 2018 Balance sheet | |||||
| Ordinary shares | 1 000 000 | Net non-current assets | R72 280 000 | ||
| Retained profits | 41 570 000 | ||||
| Shareholders equity | R42 570 000 | Inventory | 4 720 000 | ||
| Long-term debt | R25 950 000 | Accounts receivable | 4 210 000 | ||
| Cash | 2 340 000 | ||||
| Accounts payable | 4 970 000 | Current assets | R11 270 000 | ||
| Short-term debt | 10 060 000 | ||||
| Current liabilities | R15 030 000 | ||||
| R83 550 000 | R83 550 000 | ||||
Light Aeroplane Industry Ratios
| Lower Quartile | Median | Upper Quartile | |
| Current ratio | 0,50 | 1,43 | 1,89 |
| Quick ratio | 0,21 | 0,38 | 0,62 |
| Cash ratio | 0,08 | 0,21 | 0,39 |
| Total asset turnover | 0,68 | 0,85 | 1,38 |
| Inventory days | 74,6 | 59,3 | 33,5 |
| Receivables days | 58,2 | 37,2 | 25,9 |
| Total debt ratio | 0,44 | 0,52 | 0,61 |
| Debt-equity ratio | 0,79 | 1,08 | 1,56 |
| Equity multiplier | 1,79 | 2,08 | 2,56 |
| Times interest earned | 5,18 | 8,06 | 9,83 |
| Cash coverage ratio | 5,84 | 8,43 | 10,27 |
| Profit margin | 4,05% | 6,98% | 9,87% |
| Return on assets (after tax) | 6,05% | 10,53% | 13,21% |
| Return on equity | 9,93% | 16,54% | 26,15% |
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