Lundberg Corporation\'s most recent balance sheet and income statement appear be
ID: 2466288 • Letter: L
Question
Lundberg Corporation's most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $360 thousand. Dividends on preferred stock totaled $145 thousand. The market price of common stock at the end of Year 2 was $9.62 per share.
Gross margin percentage. (Round your answer to 1 decimal place.)
b.
Earnings per share of common stock. (Round your answer to 2 decimal places.)
c.
Price-earnings ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)
d.
Dividend payout ratio. (Round your intermediate calculations to 2 decimal places and final answer to 1 decimal place.)
e.
Dividend yield ratio. (Round your answer to 2 decimal places.)
f.
Return on total assets. (Round your intermediate calculations and final answer to 2 decimal places.)
g.
Return on common stockholders' equity. (Round your answer to 2 decimal places.)
h.
Book value per share. (Round your answer to 2 decimal places.)
i.
Working capital.
j.
Current ratio. (Round your answer to 2 decimal places.)
k.
Acid-test ratio. (Round your answer to 2 decimal places.)
l.
Accounts receivable turnover. (Round your answer to 2 decimal places.)
m.
Average collection period. (Assume 365 days a year and round your answer to 1 decimal place.)
n.
Inventory turnover. (Round your answer to 2 decimal places.)
o.
Average sale period. (Assume 365 days a year and round your answer to 1 decimal place.)
p.
Times interest earned. (Round your answer to 2 decimal places.)
q.
Debt-to-equity ratio. (Round your answer to 2 decimal places.)
Lundberg Corporation's most recent balance sheet and income statement appear below:
Explanation / Answer
a. Gross margin percentage. = Revenue (i.e, sales) - cost of goods sold / revenue
= 6,270,000 - 4,080,000 / 6,270,000 = 2,190,000 / 6,270,000 = 0.349 = 34.9%
b. Earnings per share of common stock= net income - preferential dividend / out standing number of shares
= 567,000 - 145,000 / 720,000 = 422,000 / 720,000 = $0.586 is the EPS
c. Price-earnings ratio =Market value per share / earnings per share
= 9.62 / 0.586 = 16.42
d. Dividend payout ratio = Total dividends / net income
= 360,000 / 560,000 = 0.64
e. Dividend yield ratio = Dividend per share / market value of share
Dividend per share = dividend paid / total outstanding common shares = 360,000 / 720,000 = 0.5 per share
Dividend yield ratio = 0.5 / 9.62 =0.052
f. Return on total assets = net income / average assets
here, average assets = opening assets + closing assets / 2
= 5,050,000 + 4,940,000 / 2 = 9,990,000/2 = 4,995,000
Return on total assets = net income / average assets = 567,000 / 4,995,000 = 0.1135
g. Return on common stockholders' equity = Net income / shareholder's equity
= 567,000 / 3,542,000 = 0.16
h. Book value per share = shareholder's equity / n umber of shares outstanding in common stock
= 3,542,000 / 720,000 = $4.92
i. Working capital = current assets - current liabilities
= 1,470,000 - 993,000 = 477,000
j. Current ratio = current assets / current liabilities
= 1,470,000 / 993,000 = 1.48
k. Acid-test ratio = (Current assets – Inventory) / Current Liabilities
=1,470,000 - 370,000 / 993,000 = 1,100,000 / 993,000 = 1.11
l. Accounts receivable turnover = Net credit sales / average acounts receivable
= 6,270,000 / 480,000 + 600,000 / 2
= 6,270,000 / 540,000 = 11.6
m. Average collection period = number of days in an year / Accounts receivable turnover
= 365 / 11.6 = 31.46 = 32 days
n. Inventory turnover =cost of goods sold / average inventory
= 4,080,000 / 510,000 + 370,000 / 2
= 4,080,000 / 440,000 = 9.27 times
o. Average sale period = 365 days / inventory turnover
= 365 / 9.27 times = 39.37 = 39.97 days
p. Times interest earned = Income before interest and taxes / Interest expenses
= 854,000 / 44,000 = 19.41 times
q . Debt-to-equity ratio = Total liabilities / total equity
= 1,508,000 / 3,542,000 = 0.4257 = 0.43 rounded off
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