Company ABC has a market capitalization of $750 million, Book Value (Shareholder
ID: 2802123 • Letter: C
Question
Company ABC has a market capitalization of $750 million, Book Value (Shareholder’s Equity) Per share of $15 and net income of $25 million. If the stock is currently trading at $30. The Return on Equity is:
3.3%
6.7%
9.3%
50.0%
2.
The current ratio of Company X is 3.0 times. Company X has working capital of $20,000. Total Current Assets for Company X are:
$6,667
$10,000
$30,000
$60,000
3.
Company X reports $200,000 in sales of Widgets in 2016. The Costs of Goods sold for these Widgets is $90,000. All other operating expenses (SG&A, R&D, Depreciation, Other, etc.) are $50,000. Which of the following is the correct representation of the profitability ratios:
Gross Profit Margin 45%, Operating Margin 30%.
Gross Profit Margin 55%, Operating Margin 30%.
Gross Profit Margin 45%, Operating Margin 20%.
Gross Profit Margin 55%, Operating Margin 20%.
A.3.3%
B.6.7%
C.9.3%
D.50.0%
2.
The current ratio of Company X is 3.0 times. Company X has working capital of $20,000. Total Current Assets for Company X are:
A.$6,667
B.$10,000
C.$30,000
D.$60,000
3.
Company X reports $200,000 in sales of Widgets in 2016. The Costs of Goods sold for these Widgets is $90,000. All other operating expenses (SG&A, R&D, Depreciation, Other, etc.) are $50,000. Which of the following is the correct representation of the profitability ratios:
A.Gross Profit Margin 45%, Operating Margin 30%.
B.Gross Profit Margin 55%, Operating Margin 30%.
C.Gross Profit Margin 45%, Operating Margin 20%.
D.Gross Profit Margin 55%, Operating Margin 20%.
Explanation / Answer
a) (in Million) Book Value of Equity 750 / 30 * 15 Book Value of Equity 375 Net income 25 Return on Equity = Net Income / Book value of Equity 25 / 375 6.70% Ans B) 6.7% b) Working Capital = Current Assets - Current Liabilities 20000 = Current Assets - Current Liabilities Current Assets = 20000 + Current Liabilities Current Ratio = Current Assets /Current Liabilities 3 = Current Assets /Current Liabilities 3 = (20000 + Current Liabilities )/ Current Liabilities Current Liabilities = 10000 Current Assets = 20000 + Current Liabilities Current Assets = 20000 + 10000 Current Assets = 30000 Ans C) $ 30000 C) Gross Profit Margin = (Sales - Cost of Goods sold) / Sales (200000 - 90000) / 200000 55% Operating Margin = (Sales - Cost of Goods sold - Operating Expenses) / Sales (200000 - 90000 -50000) / 200000 30% Ans B) Gross Profit Margin 55%, Operating Margin 30%.
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