NI / TA = .12 NI / TA = .11
NI = .12(TA) NI = .11(TA)
Since ROE = NI / E, we can substitute the above equations into the ROE formula, which yields:
ROE = .12(TA) / .65(TA) = .12 / .65 = 18.46% ROE = .11(TA) / .70 (TA) = .11 / .70 = 15.71%
23.
This problem requires you to work backward through the income statement. First, recognize
that Net income = (1
– t)EBT. Plugging in the numbers given and solving for EBT, we get:
EBT = $13,168 / (1 – 0.34) = $19,951.52
Now, we can add interest to EBT to get EBIT as follows:
EBIT = EBT + Interest paid = $19,951.52 + 3,605 = $23,556.52
To get EBITD (earnings before interest, taxes, and depreciation), the numerator in the cash
coverage
ratio, add depreciation to EBIT:
EBITD = EBIT + Depreciation = $23,556.52 + 2,382 = $25,938.52
Now, simply plug the numbers into the cash coverage ratio and calculate:
Cash coverage ratio = EBITD / Interest = $25,938.52 / $3,605 = 7.20 times
24.
The only ratio given which includes cost of goods sold is the inventory turnover ratio, so it is
the last ratio used.
Since current liabilities is given, we start with the current ratio:
Current ratio = 1.40 = CA / CL = CA / $365,000
CA = $511,000
Using the quick ratio, we solve for inventory:
Quick ratio = 0.85 = (CA – Inventory) / CL = ($511,000 – Inventory) / $365,000
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '08
 spurlin

Click to edit the document details