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Chapter 13 Homework 2

# Chapter 13 Homework 2 - T/P 25000.00 A/R 80000.00 Salaries...

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Professor Smith ACCT151 23 October 2008 Chapter 13 Homework 2 E8,E10,P1,P3 E8) 1. a. Return on Sales= .1385 = Net Income + .6*Interest Expense/Net sales b. Asset Turnover=Net sales/ Avg Total Assets= .3611 c. Return on Assets= Net Income + .6*Interest Expense/Avg Total Assets= .05 d. Return on common stockholder’s equity=Net income-Preferred Dividends/Avg Common Stockholders Equity= .0375 2. Evergreen has not been successful in using outside funds b/c the return on SE equity of 3.75% is less than return to all providers of capital of 5%. E10) a. Earnings per share=Net income-preferred dividends/Weighted Avg # of Common Shares= \$2.25 b. Current Market Price/Earnings per share=11 to 1 c.Common dividends per share/earnings per share=.7111 d. Common dividends per share/Market price per share=6.5% P1) Working Capital=\$120,000 Current Ratio =1.6 Quick Ratio=1.05 Cash 70000.00 A/P 75000.00 Short term Inv 60000.00

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Unformatted text preview: T/P 25000.00 A/R 80000.00 Salaries and Wages 40000.00 Inventory 100000.00 Loans Payable 60000.00 Prepaid Ins 10000.00 Total 320000.00 Total 200000.00 Working Capital Current Ratio Quick Ratio a. \$ 120,000 1.545 0.955 b. \$ 120,000 1.600 0.975 c. \$ 120,000 1.706 1.059 d. \$ 120,000 1.600 1.050 e. \$ 120,000 1.600 1. f. \$ 180,000 1.900 1.350 g. \$ 120,000 1.686 1.06 h. \$ 120,000 1.500 1.04 i. \$ 75,000 1.375 0.825 j. \$ 120,000 1.6 1.050 k. \$ 90,000 1.450 .9 l. \$ 105,000 1.488 .977 P3) 1. a. Return on sales = Net income + interest expense, net of tax / net sales, 8.3% b. Asset turnover = net sales/avg. total assets, 1.5 c. Return on assets = return on sales x asset turnover, .1245 2. 1.6 3. 6,750,000 4. Income will have to increase by 35% to get a 15% return on assets. They need cheaper sources and cheaper labor or save money on expenses....
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