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1. Compute each of the following for each of the last two years, 20X1 and 20X2: a. Rate of return on sales b. Rate of return on stockholders’ equity c. Current ratio Rotio coftoto

1. Compute each of the following for each of the last two years, 20X1 and 20X2: a. Rate of return on sales b. Rate of return on stockholders’ equity c. Current ratio Rotio coftoto

Fundamentals of Financial Management (MindTap Course List)
Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter4: Analysis Of Financial Statements
Section: Chapter Questions
Problem 24P: Income Statement for Year Ended December 31, 2018 (Millions of Dollars) Net sales 795.0 Cost of...
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g. Average collection period for accounts receivable h. P/E ratio i. Dividend-payout percentage j. Dividend yield 2. Answer yes or no to each of these questions and indicate which of the computations in number 1 support your answer: a. Have business operations improved? b. Has gross profit rate improved? c. Has the rate of return on sales deteriorated? d. Has the rate of return on owners’ investment increased? e. Is there a decrease in the effectiveness of collection efforts? f. Are dividends relatively more generous? g. Have the risks of insolvency changed significantly? h. Has the market price of the stock become cheaper relative to earnings? i. Has there been a worsening of the company’s ability to pay current debts on time? j. Has there been a decline in the cash return on the market value of the capital stock? k. Did the collectibility of the receivables improve? 3. Basing your observations on only the available data and the ratios you computed, prepare some brief comments on the company's operations and financial changes during the three years.
Transcribed Image Text:g. Average collection period for accounts receivable h. P/E ratio i. Dividend-payout percentage j. Dividend yield 2. Answer yes or no to each of these questions and indicate which of the computations in number 1 support your answer: a. Have business operations improved? b. Has gross profit rate improved? c. Has the rate of return on sales deteriorated? d. Has the rate of return on owners’ investment increased? e. Is there a decrease in the effectiveness of collection efforts? f. Are dividends relatively more generous? g. Have the risks of insolvency changed significantly? h. Has the market price of the stock become cheaper relative to earnings? i. Has there been a worsening of the company’s ability to pay current debts on time? j. Has there been a decline in the cash return on the market value of the capital stock? k. Did the collectibility of the receivables improve? 3. Basing your observations on only the available data and the ratios you computed, prepare some brief comments on the company's operations and financial changes during the three years.
17-38 Financial Ratios The annual reports of Milano SpA, an Italian clothing chain, included the following selected data (in millions): 20X2 20X1 20X0 Annual amounts: Net income € 90* € 60 € 25 Gross margin on sales 520 380 200 Cost of goods sold 980 620 300 Operating expenses 380 295 165 Income tax expense 50 25 10 Dividends declared and paid 35 15 5 End-of-year amounts: Long-term assets €240 €220 €180 Long-term debt 85 65 40 Current liabilities 65 55 35 Cash 20 10 Accounts receivable 85 70 40 Merchandise inventory 120 85 60 Paid-in capital 205 205 205 Retained income 110 55 10 *€ is the European euro. During each of the three years, 10 million shares of common stock were outstanding. Assume that all sales were on account and that the applicable market prices per share of stock were € 90 for 20X1 and € 117 for 20X2. 1. Compute each of the following for each of the last two years, 20X1 and 20X2: a. Rate of return on sales b. Rate of return on stockholders' equity c. Current ratio d. Ratio of total debt to stockholders’ equity e. Ratio of current debt to stockholders' equity f. Gross profit rate
Transcribed Image Text:17-38 Financial Ratios The annual reports of Milano SpA, an Italian clothing chain, included the following selected data (in millions): 20X2 20X1 20X0 Annual amounts: Net income € 90* € 60 € 25 Gross margin on sales 520 380 200 Cost of goods sold 980 620 300 Operating expenses 380 295 165 Income tax expense 50 25 10 Dividends declared and paid 35 15 5 End-of-year amounts: Long-term assets €240 €220 €180 Long-term debt 85 65 40 Current liabilities 65 55 35 Cash 20 10 Accounts receivable 85 70 40 Merchandise inventory 120 85 60 Paid-in capital 205 205 205 Retained income 110 55 10 *€ is the European euro. During each of the three years, 10 million shares of common stock were outstanding. Assume that all sales were on account and that the applicable market prices per share of stock were € 90 for 20X1 and € 117 for 20X2. 1. Compute each of the following for each of the last two years, 20X1 and 20X2: a. Rate of return on sales b. Rate of return on stockholders' equity c. Current ratio d. Ratio of total debt to stockholders’ equity e. Ratio of current debt to stockholders' equity f. Gross profit rate
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