Mugs Company Additional Information: Using the financial statements and addition
ID: 2375472 • Letter: M
Question
Mugs Company
Additional Information:
Using the financial statements and additional information, compute the following ratios for the Mugs Company for 2007. You need to label your ratios and show your calculations for maximum credit.
Mugs Company
Comparative Balance Sheet December 31, 2007 2007 2006 Assets Cash $ 25,000 $ 40,000 Marketable securities 20,000 60,000 Accounts Receivable (net) 40,000 30,000 Inventory 150,000 170,000 Property,plant and equipment (net) 170,000 200,000 Total Assets $405,000 $500,000 Liabilities and stockholders' equity Accounts payable $ 25,000 $ 30,000 Bond Interest payable 40,000 90,000 Bonds payable 75,000 160,000 Common Stock 175,000 145,000 Retained earnings 90,000 75,000 Total liabilities and stockholders' equity $405,000 $500,000Explanation / Answer
Hi,
Please find the answers as follows:
Current ratio = Current Assets/Current Liabilities = (25000 + 20000 + 40000 + 150000)/(25000 + 40000) = 3.62
Return on common stockholder's equity = Net income/Common Stock = 75000/175000*100 = 42.86%
Earnings Per Share = Net Income/Number of outstanding shares = 75000/62000 = 1.21
Price earnings ratio = Market Price per share/Earnings per share = 15/1.21 = 12.40
Inventory turnover ratio = Cost of Goods Solde/Average Inventory = 184000/(150000+170000)/2 = 1.15 times
Average days in inventory = 365/Inventory Turnover Ratio = 365/1.15 = 317.39 days
Receivable turnover = Net Sales/Average Accounts Receivables = 360000/(40000 + 30000)/2 = 10.29 times
Average days to collect receivables = = 365/Receivable turnover = 365/10.29 = 35.47 days
Profit margin ratio = Net Income/Net Sales*100 = 75000/360000*100 = 20.83%
Payout ratio = Yearly dividend per share/EPS = (50000/62000)/1.21 = 66.65%
Return on assets = Net income/Total assets = 75000/405000*100 = 18.52%
Thanks.
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