The Retail Group, Inc. Statement of Financial Position December 31, 20X9 (all am
ID: 2564926 • Letter: T
Question
The Retail Group, Inc.
Statement of Financial Position
December 31, 20X9
(all amounts in millions)
Assets Liabilities and Stockholders’ Equity .
Current assets: Current liabilities:
Cash………………..……………………. $12.0 Accounts payable………… $9.0
Accounts receivable (net)……. 9.0 Salaries payable………….. .8
Marketable securities........... 5.5 Dividends payable……….. .6
Prepaid insurance................ .5 Interest payable…………. .5
Inventory.......................... 7.2 Total current liabilities…. 10.9
Total current assets.............. 34.2
Assets Liabilities and Stockholders’ Equity .
Property, plant, & equipment: Long-term liabilities:
Equipment (net).................. 5.0 Notes payable…………... 12.0
Buildings (net)………………..…….. 11.0 Bonds payable….……….. 14.0
Land……………………................. 4.0 Total long-term liabilities…… 26.0
Total property, plant, & equipment 20.0 Total liabilities….…………… $36.9
Other assets: Stockholders’ equity:
Investments……………………………... 8.0 Common stock……….….. 15.0
Patents………………………………..……. .5 Retained earnings………. 10.8
Total other assets……………………….…. 8.5 Total stockholders’ equity…..…… 25.8
Total liabilities and
Total assets…………………............... $62.7 stockholders’ equity….……….. $62.7
The Retail Group, Inc.
Income Statement
For the Year Ended December 31, 20X9 (all amounts in millions)
Sales……………………………………………………….…………$85.0
Cost of goods sold…………….……………………………… 51.0
Gross profit………………………………………………….….. 34.0
Selling expenses:
Sales salaries and commissions…… $8.2
Insurance expense……………………... 1.5
Advertising expense…………………….. 2.5
Utilities expense…………………………. 2.4
Depreciation expense: equipment…. 1.0
Delivery expense…………………………. .2
Total selling expenses…………………….. $15.8
General and administrative expenses:
Executive and administrative salaries.. $7.9
Utilities expense………………………………... 2.5
Rental expense……………………………………. .7
Depreciation expense: building……….... .6
Patent amortization expense………………. .6
Total general and administrative expenses… 12.3
Total operating expenses………………………………………………. 28.1
Operating income…..…………………………………………………… 5.9
Nonoperating items:
Interest revenue………………………………… ($.2)
Interest expense…………………………………. 1.4
Nonoperating expense (net)………………………………………… 1.2
Income before income taxes……………………………………….. 4.7
Income tax expense…………………………………………………….. 1.9
Net income………………………………………………..………………… $2.8
Additional Financial Statement
Information for The Retail, Group Inc.
800,000 weighted average shares of common stock were issued and outstanding throughout 20X9.
The accounts receivable balance (net of uncollectible accounts) on December 31, 20X8 was $8,400,000. All sales are credit sales.
The inventory balance on December 31, 20X8 was $6,600,000.
$2,000,000 in total dividends were declared during 20X9.
Total stockholders’ equity on December 31, 20X8 was $25,000,000.
Total assets on December 31, 20X8 were $58,600,000.
The market price per share of common stock on December 31, 20X9 was $49.
There was no preferred stock.
Based on the Statement of Financial Position as of December 31, 20X9, the Income Statement for the year-ended December 31, 20X9, and the additional financial information provided for The Retail Group, Inc. on the next 5 slides, calculate the the following ratios:
5. 20X9 Asset Turnover Ratio?, 20X9 Rate of Return on Common?, Shareholders’ Equity ( 20X9 Earnings per Share?, 20X9 Price/Earnings Ratio?, 20X9 Dividend Yield?, 20X9 Dividend Payout?.)
Explanation / Answer
asset turnover ratio = sales/average total assets
85/60.65
1.401484
sales
85
average of total assets = (opening +closing)/2
(62.7+58.6)/2
60.65
rate of return on common stock holder equity = net income/average equity
2.8/25.4
11.02%
net income
2.8
average equity = (opening +closing)/2
(25.8+25)/2
25.4
Earning per share = net income/no of share outstanding
2.8/.8
3.5
net income
2.8
no of share
0.8
price earning ratio = market price/eps
49/3.5
14
Earning per share = net income/no of share outstanding
3.5
market price
49
Dividend yield = dividend per share/market price
2.5/49
5.10%
market price
49
dividend per share
2/.8
2.5
dividend pay out ratio = dividend paid/net income
2.5/2.8
89.29%
dividend paid
2.5
net income
2.8
asset turnover ratio = sales/average total assets
85/60.65
1.401484
sales
85
average of total assets = (opening +closing)/2
(62.7+58.6)/2
60.65
rate of return on common stock holder equity = net income/average equity
2.8/25.4
11.02%
net income
2.8
average equity = (opening +closing)/2
(25.8+25)/2
25.4
Earning per share = net income/no of share outstanding
2.8/.8
3.5
net income
2.8
no of share
0.8
price earning ratio = market price/eps
49/3.5
14
Earning per share = net income/no of share outstanding
3.5
market price
49
Dividend yield = dividend per share/market price
2.5/49
5.10%
market price
49
dividend per share
2/.8
2.5
dividend pay out ratio = dividend paid/net income
2.5/2.8
89.29%
dividend paid
2.5
net income
2.8
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