FIN 3162 Exam I - Vladimir Milosavljevic

FIN 3162 Exam I- - FIN 3162 Name Vladimir Milosavljevic Exam I 1 From the following financial statements calculate the indicated ratios for the

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FIN 3162 Exam I Name: Vladimir Milosavljevic 1. From the following financial statements, calculate the indicated ratios for the Spencer Co. and compare the ratios to the provided industry standards: Income Statement Net Sales (75% credit) $15,000 Less: Cost of Goods Sold (8,000) Gross Profit $7,000 Selling Expenses 1,800 General and Administrative 1,100 (2,900) Operating Income 4,100 Less: Interest Expense (600) Income Before Taxes $3,500 Less: Taxes 35% ($1,225) Net Income $2,275 Dividends Paid $1000 Assets: Cash $600 Marketable Securities 400 Accounts Receivable 1,900 Inventory 2,200 Prepaid Expenses 700 Land and Building 3,550 Machinery and Equipment 1,800 Office Furniture and Equipment 750 Less: Accumulated Depreciation (1,300) Total Assets $10,600 Liabilities and Stockholders’ Equity: Accounts Payable $1,600 Notes Payable 700 Bonds Payable 1,500 Common Stock, (2000 shares outstanding) 3,400
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Income Statement Paid-in Capital 1,400 Retained Earnings 2,000 Total Liabilities and Stockholder’s Equity $10,600 Market Price per Share $35.00 Ratio Industry Standard Pick any 10 and Show Calculation Here 1. Currkent Ratio = Current Assets/Current Liab. 2.2 (600+400+1,900+2,200+7 00)/ (1,600+700) = 5,800/2,300= 2.5 2. Acid Test = (Current Assets- Inventory)/Current Liab. 1.3 (5800-2200)/2300= 1.6 3. DSO = AR/(Credit Sales/365) 35 days 1900/ ((75%*15000)/365)= 62 days 4. Inventory Turnover = CGS/Inventory 3.5 8000/2200= 3.6 5. Fixed Asset Turnover = Sales/Net Fixed Assets 1.2x 15,000/ (3,550+1,800+750- 1,300)= 3.1x 6. Debt Ratio = Total Liab./Total Assets 50% (1,600+700+1,500)/10,60 0= 36% 7. Interest Coverage Ratio = Operating Income/Interest Exp. 5.1x 4,100/600= 6.8x 8 . Asset Turnover = Sales/Total Assets 20% 15,000/10,600= 1.4x 9.. ROA (%) = Net Income/Assets 15% 2,275/10,600 = 21% 10. Dividend Payout Ratio (%) = Dividends per share/EPS 25% (1,000/2,000 shares)/ $1.14= 44% 11. ROE (%) = (Net Income – Pfd.Dividends)/CS Equity 17% (2,275-0)/ (3,400+1,400+2,000)= 33%
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Income Statement 12 . Book Value per share = (Stockholders’ Equity – Pfd. Stock)/ # of CS shares outstanding N/A (3,400+1,400+2,000 – 0)/ 2,000 sh.= $3.40 13. EPS = (Net Income – Pfd. Dividends)/# of CS shares outstanding N/A (2,275-0)/2,000 shares = $1.14 14. P/E ratio = Market Price per share/EPS 30x $35.00/$1.14= 31x 15. Dividend Yield = Dividends per share/Market Price per share 8% (1,000/2,000 shares)/ $35.00= 1.4% Given the industry standards above, discuss the financial health of the firm. LIQUIDITY
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This note was uploaded on 10/07/2010 for the course FIN 3162N taught by Professor Spencer during the Spring '10 term at Dowling.

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FIN 3162 Exam I- - FIN 3162 Name Vladimir Milosavljevic Exam I 1 From the following financial statements calculate the indicated ratios for the

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