The financial statements of ABC Company are given below: ABC Company Income Stat

Question

The financial statements of ABC Company are given below: ABC Company Income Statement (2017) Sales $8,000,000 5,260,000 2,740,000 1,350,000 150,000 1,240,000 140,000 1,100,000 440,000 S660,000 Cost of goods sold Gross proft Selling and administrative expenses Depreciation Operating profit Interest expenses Income before tax Tax expense Net income Balance Sheet 2017 2016 Cash Accounts receivable Inventory Total current assets Fixed assets Total assets 200,000 $50,000 1,200,000 950,000 1,840,000 1,500,000 3,240,000 2,500,000 3,200,000 3,000,000 $6,440,000 $5,500,000 Accounts payable Bank loan Total current liabilities Bonds payable Total liabilities Common stock (130,000 shares) Retained earnings Total liabilities & equity 800,000 720,000 600,000 100,000 1,400,000 820,000 900,000 1,000,000 2,300,000 1,820,000 300,000 300,000 3,840,000 3,380,000 $6,440,000 $5,500,000 Note: The common shares are trading in the stock market for $40 each.

Explanation / Answer

15) PEG ratio for 2017= P/E ratio / earnings growth rate P/E = 40/(660000/130000) = 7.88 PEF ratio = 7.88/5 = 1.58 Answer 16) EV/EBITDA = 7300000/(1240000+150000) = 5.25 Answer Note: EV = market capitalization + preferred shares + minority interest + debt - total cash = 130000*40+2300000-200000 = 7300000 17) ROE (using DuPont identity) = Return on Equity (ROE) = (Net Income / Average Shareholders' Equity) = (Net Income / Total Revenue) x (Revenue / Average Total Assets) x (Average Total Assets / Average Shareholders' Equity) = (660000/8000000)*((8000000*2)/(6440000+5500000))*((6440000+5500000)/(4140000+3680000) = 16.88% Answer

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