both question please EC300 Homework 2 Fall 2018 Due date: Tuesday, September 11)
ID: 2813667 • Letter: B
Question
both question please
EC300 Homework 2 Fall 2018 Due date: Tuesday, September 11) Use the following financial statements to answer all the questions on the homework. Smolira Golf, Inc. Balance Sheets as of December 31, 2015 and 2016 2015 2016 Assets Current assets Cash Accounts receivable Inventory 7,702 17,357 $28,666 3,670$4,910 8,149 20,350 $33,409 Total Fixed assets Net plant and equipment$58,688 $87,354 $76,810 $110,219 Total assets Liabilities and owners' equity Current liabilities Accounts payable Notes payable $3,413 2,906 $3,848 3,581 $7,427 $20,000 Total Long-term debt Owners' equity $22,500 Common stock and paid-in surplus $38,000 20,535-44,7% $58,535$82,792 Accumulated retained eamings Total Total liabilities and owners' equity $7,354 $1029 $110,219 Smolira Golf, Inc. 2016 Income Statement $195,227 128,383 Sales Cost of goods sold Depreciation EBIT Interest paid Taxable income Taxes Net income $60,934 1,617 $59,317 25,760 $34,557 Dividends Retained earnings $10,300 24,257Explanation / Answer
Dupont Identity:
ROE = net profit margin × asset turnover × equity multiplier
a.) Profit Margin: Net Income/ Sales= $34557/$195227= 0.177
b.) Asset Turnover= Revenue/Total Assets= $195227/$110219= 1.771
c.) Equity Multiplier= Total Assets/ Shareholders equity= $110219/$38000= 2.9
Hence ,ROE= 0.177x 1.771x 2.9= 0.90= 90%
2. P/E ratio= MPS/EPS= $73/3.4557= 21.12
EPS= Net Income/ No of Shares= $34557/10000
3. Price to Sales Ratio: Share Price/ Sales per share= $73/ $19.5227= 3.739
Sales per Share= Sales/ No of Shares= $195227/$10000= $19.5227
4. Market to book Ratio: Book value of firm/ Market value of firm= $ 82792/$730000= 11%
Book Value of Firm= Total Assets- (Current Liabilities+Long Term Debt)= $110219-($20000+$7427)= $82792
Market Value of firm= No of outstanding sharesx market price of stock= 10000x $73= $730000
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