Recitation solut-Ch 17 - (15-20 min a E 17-18 Current ratio...

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(15-20 min.) E 17-18 a. Current ratio: 2007: $61,000 + $28,000 + $122,000 + $237,000 = 1.63 $275,000 2006: $47,000 + $116,000 + $272,000 = 2.15 $202,000 b. Acid-test ratio: 2007: $61,000 + $28,000 + $122,000 = 0.77 $275,000 2006: $47,000 + $116,000 = 0.81 $202,000 c. Debt ratio: 2007: $315,000* = 0.56 2006: $254,000** = 0.52 $560,000 $490,000 __________ __________ *$275,000 + $40,000 = $315,000 **$202,000 + $52,000 = $254,000 d. Times-interest-earned ratio: 2007: $165,000 = 3.44 times 2006: $158,000 = 4.05 times $48,000 $39,000 Summary: The company’s ability to pay its current liabilities, total liabilities, and interest expense deteriorated during 2007, as shown by the worsening of all four ratios.
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(10-15 min.) E 17-19 (Dollars in thousands) a. Rate of return on net sales: 2006: $16,000 = 0.092 2005: $12,000 = 0.076 $174,000 $158,000 b. Rate of return on total assets: 2006: $16,000 + $9,000 = 0.127 2005: $12,000 + $10,000 = 0.122 $197,500* $181,000** __________ __________ *($204,000 + $191,000) / 2 = $197,500 **($191,000 + $171,000) / 2 = $181,000 c. Rate of return on common stockholders’ equity: 2006: $16,000 $3,000 = 0.141 2005: $12,000 $3,000 = 0.107 $92,500*** $84,000**** __________ __________ ***($96,000 + $89,000) / 2 = $92,500 ****($89,000 + $79,000) / 2 = $84,000 d. Earnings per share of common stock: 2006: $16,000 $3,000 = $0.65 2005: $12,000 $3,000 = $0.45 20,000 20,000 The company’s operating performance improved during 2006. All four profitability measures increased.
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(10-15 min.) E 17-20 2008 2007 a. Price/earnings ratio: $16.50 = 27.5 $13 = 26 ($60,000 $12,000) / 80,000 ($52,000 $12,000) / 80,000 b. Dividend yield: $20,000 / 80,000 = 0.015 $20,000 / 80,000 = 0.019 $16.50 $13 c. Book value per share of common stock: $780,000 $200,000 = $7.25 $600,000 $200,000 = $5 80,000 80,000 The stock’s attractiveness increased during 2008, as shown by the increases in the price/earnings ratio and in book value per share. The dividend yield decreased, but that would be important only to investors who want dividends. Overall, the common stock looks more attractive than it did a year ago. (20-30 min.) P 17-23A Req. 1 Todd Department Stores, Inc.
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