Lundberg Corporation\'s most recent balance sheet and income statement appear be
ID: 2480778 • Letter: L
Question
Lundberg Corporation's most recent balance sheet and income statement appear below:
Dividends on common stock during Year 2 totaled $50 thousand. The market price of common stock at the end of Year 2 was $9.42 per share.
Compute the gross margin percentage for Year 2. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
Compute the earnings per share (of common stock) for Year 2.(Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Compute the price-earnings ratio for Year 2. (Do not round intermediate calculations. Round your answer to 1 decimal place.)
Compute the dividend payout ratio for Year 2. (Do not round intermediate calculations. Round your answer to 1 decimal place. Omit the "%" sign in your response.)
Compute the dividend yield ratio for Year 2. (Round your answer to 2 decimal places. Omit the "%" sign in your response.)
Compute the return on total assets for Year 2. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)
Compute the return on common stockholders' equity for Year 2. (Round your answer to 2 decimal places. Omit the "%" sign in your response.)
Compute the book value per share for Year 2. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Compute the working capital for Year 2. (Input your answer in thousands of dollars. Omit the "$" sign in your response.)
Compute the current ratio for Year 2. (Round your answer to 2 decimal places.)
Compute the average collection period for Year 2. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to one decimal place.)
Compute the inventory turnover for Year 2. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Compute the average sale period for Year 2. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 1 decimal place.)
Compute the times interest earned for Year 2. (Round your answer to 2 decimal places.)
Compute the debt-to-equity ratio for Year 2. (Round your answer to 2 decimal places.)
December 31, Year 2 and Year 1
(in thousands of dollars) Year 2 Year 1 Asset: Current assets: Cash $ 160 $ 170 Accounts receivable 270 280 Inventory 170 160 Prepaid expenses 25 25 Total current assets 625 635 Plant and equipment, net 964 944 Total assets $ 1,589 $ 1,579 Liabilities and stockholders' equity: Current liabilities: Accounts payable $ 220 $ 210 Accrued liabilities 110 110 Notes payable, short term 160 170 Total current liabilities 490 490 Bonds payable 250 300 Total liabilities 740 790 Stockholders' equity: Preferred stock, $100 par value, 10% 260 260 Common stock, $1 par value 100 100 Additional paid-in capital--common stock 110 110 Retained earnings 379 315 Total stockholders' equity 849 785 Total liabilities and stockholders' equity $ 1,589 $ 1,575
Explanation / Answer
All values, unless otherwise specified, in Thousands of Dollars Required: a. Compute the gross margin percentage for Year 2. (Round your answer to 1 decimal place. Omit the "%" sign in your response.) Gross margin percentage 38.4 Gross Margin = Gross Margin / Sales = 38.4% b. Compute the earnings per share (of common stock) for Year 2.(Round your answer to 2 decimal places. Omit the "$" sign in your response.) Earnings per share 1.4 Earnings per Share = Net Income / Average No. of common stock outstanding Common Stock issued = 100,000 / 1 = 100,000 share Thus, Earnings per Share = 1.4 $ per share c. Compute the price-earnings ratio for Year 2. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Price-earnings ratio 6.7 Price Earnings Ratio = Market Price per share / Earnings per share = 6.7 : 1 d. Compute the dividend payout ratio for Year 2. (Do not round intermediate calculations. Round your answer to 1 decimal place. Omit the "%" sign in your response.) Dividend payout ratio 50 Dividend Payout Ratio = Dividends Paid / Common Stock = 50 / 100 = 50% e. Compute the dividend yield ratio for Year 2. (Round your answer to 2 decimal places. Omit the "%" sign in your response.) Dividend yield ratio 5.31 Dividend Yield Ratio = Dividend Per share / Market Price per share Dividend per share = Dividends Paid / No. of shares outstanding = 50,000 / 100,000 = $ 0.5 per share Hence, Dividend Yield Ratio = $ 0.5 / $ 9.42 = 5.31% f. Compute the return on total assets for Year 2. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.) Return on total assets 8.84 Return on Total Assets = Net Income / Average Total Assets Average Total Assets = ( $ 1,589 + $ 1,579) / 2 = $ 1,584 Hence, Return on Total Assets = $ 140 / $ 1,584 = 8.84% g. Compute the return on common stockholders' equity for Year 2. (Round your answer to 2 decimal places. Omit the "%" sign in your response.) Return on common stockholders' equity 17.14 Return on Common Stockholders' Equity = Net Income / Average Stockholders' Equity Average Stockholders' Equity = ( $ 849 + $ 785) / 2 = $ 817 Hence, Return on Common Stockholders' Equity = $ 140 / $ 817 = 17.14% h. Compute the book value per share for Year 2. (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Book value per share 2.1 Book Value per share = Value of Common Shareholders' Equity / No. of shares outstanding Value of Common Shareholders' Equity = Common Stock + Additional Paid-in Capital = 100 + 110 = $ 210 Thus, Book Value per share = $ 210,000 / 100,000 = $ 2.10 per share i. Compute the working capital for Year 2. (Input your answer in thousands of dollars. Omit the "$" sign in your response.) Working capital 135 Working Capital = Current Assets - Current Liabilities = $ 625 - $ 490 = $ 135 j. Compute the current ratio for Year 2. (Round your answer to 2 decimal places.) Current ratio 1.28 Current Ratio = Current Assets / Current Liabilities = $ 625 / $ 490 = 1.28 k. Compute the acid-test ratio for Year 2.(Round your answer to 1 decimal place.) Acid-test ratio 0.9 Acid Test Ratio = (Current Assets - Inventory) / Current Liabilities Current Assets - Inventory = $ 625 - $ 170 = $ 455 Thus, Acid Test Ratio = $ 455 / $ 490 = 0.9 l. Compute the accounts receivable turnover for Year 2. (Round your answer to 2 decimal places.) Accounts receivable turnover 5.05 Accounts Receivable Turnover = Sales / Average Accounts Receivables Average Accounts Receivables = ( $ 270 + $ 280) / 2 = $ 275 Thus, Accounts Receivable Turnover = $ 1,390 / $ 275 = 5.05 m. Compute the average collection period for Year 2. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to one decimal place.) Average collection period 72.2 days Average Collection Period = 365 / Accounts Receivable Turnover = 365 / 5.05 = 72.2 days n. Compute the inventory turnover for Year 2. (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Inventory turnover 32.77 Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory Average Inventory = ($ 170 + $ 160) / 2 = $ 165 Hence, Inventory Turnover Ratio = $ 856 / $ 165 = 5.188 In terms of no. of days this works out to 365 / 5.188 = 70.35 days Thus, the inventory turnover in terms of dollars will be $ 170 X 70.35 / 365 = 32.77 o. Compute the average sale period for Year 2. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 1 decimal place.) Average sale period 70.3 days Average Sale Period = 365 / Inventory Turnover = 70.35 days or 70.3 days p. Compute the times interest earned for Year 2. (Round your answer to 2 decimal places.) Times interest earned 6.41 Times Interest Earned = EBIT for Year 2 / Interest Expense = $ 237 / $ 37 = 6.405 q. Compute the debt-to-equity ratio for Year 2. (Round your answer to 2 decimal places.) Debt-to-equity ratio 0.87 Debt Equity Ratio = Debt / Equity Debt = Total Liabilities Equity = Total Shareholders' Equity Hence, Debt Equity Ratio = $ 740 / $ 849 = 0.87
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.