136.
Computation of profitability ratios
Shown below are selected data from a recent annual report of Tall Oaks Co. (Dollar
amounts are in thousands.)
Compute for the year the company’s:
137.
Profitability measures
Shown below is a recent income statement for B-D Electric.
Assume that comparative balance sheets for B-D Electric indicate average total assets for
the year of $2,500,000, and average total equity of $2,050,000. Compute the following:
138.
ROI: What and why?
In general terms, what do all “ROI” ratios measure? Why are such computations useful?
139.
The following information is available for the Grant Company for 2015:
Required:
What are earnings per share for the current year?
What is the P/E ratio?
What is the book value per share of common stock?
What is the dividend yield on common stock?
What is the net profit ratio?
What is the return on equity?
140.
Financial ratios
Shown below are some key figures from the balance sheets of Minuteman Gas Company
for two successive years:
Dividends of $96,000 were declared and paid in 2015. Compute the following:
Current ratio at end of 2014.
Current ratio at end of 2015.
Working capital at end of 2014.
Working capital at end of 2015.
Debt ratio at end of 2014.
Debt ratio at end of 2015.
Earnings per share for 2015.
14–81
141.
Financial ratios
Given below are comparative balance sheets and an income statement for the Excellent
Corporation:
All sales were made on account. Cash dividends declared during the year totaled $58,550.
Compute the following:
142.
Effects of transactions upon analytical measurements
Determine the immediate effect of each of the transactions described below on the ratio
listed beside each transaction. In the blank space to the left of each statement, you are to
indicate the effect by writing the appropriate code letter. The code letters are as follows: I
= increase the ratio, D = decrease the ratio, and NE = no effect on this ratio.
143.
Below are eight ratios. Match each equation to the correct ratio. If there is no match, use
“None” as your response.
________ (a.) Net income – preferred dividends divided by average number of common
shares outstanding
________ (b.) Net sales divided by average accounts receivable
________ (c.) Operating income divided by average total assets
________ (d.) Current assets divided by current liabilities
________ (e.) Annual dividend divided by current stock price
________ (f.) Current assets minus current liabilities
________ (g.) Total liabilities divided by total assets
________ (h.) Net income divided by average total equity
________ (i.) Common stockholder’s equity divided by shares of common stock outstanding
________ (j.) Current stock price divided by earnings per share
144.
Percentage changes; p/e ratios and investors’ expectations
Shown below are Gamma, Inc.’s earnings per share for a four-year period, along with the
per-share market price of the company’s stock at each year-end. The earnings in 2015
were the highest in the company’s history.
(a) Compute the percentage change in earnings per share in 2013, 2014, and 2015. (Place
your answers in the spaces provided above.)
(b) Compute the p/e ratio of stock at the end of each of the four years. (Place your
answers in the spaces provided above.)
(c) What does the p/e ratio at the end of 2015 indicate about investors’ expectations of
earnings per share for the coming year? Explain your reasoning.
145.
Effects of events on financial measurements
Indicate the probable effects of each of the following strategies or events upon the
financial measurements of Lindsay Corp. listed below. Use the code letters I = Increase, D
= Decrease, and NE = No Effect.
146.
Use and interpretation of financial measurements
Shown below are various financial measurements for two companies which are similar in
size and sell similar products:
Instructions: You are to enter code letters in the spaces provided in the two right-hand
columns.
In the first column, indicate which of the following three groups probably would be most
interested in the specified financial measurement. Identify one group, using the following
code letters: STC = indicating short-term creditors, LTC = indicating long-term creditors,
and S = indicating stockholders.
In the second column, enter an X or a Y to indicate whether your “most interested group”
would prefer the measurement results reported by Co. X or Co. Y.
Consider each financial measurement independently of the others.
