James Madison was brought in as assistant to Computron’s chairman, who had the task of getting the company back into a sound financial position. Madison must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions to take. Your assignment is to help her answer the following questions, using the recent and projected financial information shown next. Provide clear explanations, not yes or no answers.Calculate the profit margin? operating profit margin? basic earning power (BEP)? return on assets (ROA)? and return on equity (ROE).What can you say about these ratios? Additional InformationProjection201820192020EYear-end common stock price$8.50$7.50$11.15Shares outstanding (millions)Common dividends (millions)100,000$9,500100,000$8,560100,000$10,000Таx rate25%25%25%Additions to retained earnings (millions)Lease payments (millions)$379,225$35,000-$14,185$35,000$556,325$35,000Per Share InformationProjection201820192020E$3.89$0.10$12.43$5.66$0.10$17.85EPS-$0.06$0.09$12.28DPSBook Value Per ShareRatio AnalysisIndustryAverage7.2%201820192020EProfit margin11.0%-0.1%Operating profit marginBasic earning power16.5%2.6%10.4%28.7%4.5%15.6%ROA19.1%-0.2%10.8%ROE31.3%-0.5%15.4%Inventory turnover3.13.29.0Days sales outstanding25.935.128.0Fixed assets turnover4.04.93.0Total assets turnover1.7361.7191.5Current2.11.72.5Quick0.60.51.9Debt ratio24.3%43.2%15.0%Debt-to-equity ratio0.401.160.22Liabilities-to-assets ratio38.9%62.6%32.0%TIE8.91.013.0EBITDA coverage6.31.917.2Price/earnings (P/E)Market/book2.2-133.316.80.70.62.7 201820192020EAssetsCash and equivalents$$$7,78225,000542,46015,50072,63285,70010,000Short-term investments52,600250,600Accounts receivable1,779,572$ 1,953,4041,785,600Inventories837,9821,546,252$1,151,182$2,121,4941,164,085Total current assetsNet Fixed Assets882,982Total Assets$2,034,164$3,285,579$ 3,739,004Liabilities and equityAccounts payableNotes payable$$$154,600250,000382,500620,000452,300450,000Аccruals142,000254,700352,000$ 1,257,200800,000Total current liabilities$546,600$1,254,300Long-term bonds245,000700,000Total liabilities$791,600$ 2,057,200$1,954,300Common stock (100,000 shares)Retained earnings1,000,0001,000,0001,000,000242,564$ 1,242,564$ 2,034,164228,379784,704$ 1,228,379$ 3,285,579Total common equity$ 1,784,704Total liabilities and equity$3,739,004Income Statements (Millions of Dollars)Projection201820192020E$3,532,000$2,547,000$ 7,453,600$ 5,750,000Net sales$5,648,500$4,687,500Cost of goods sold (Excluding depr.)DepreciationOther operating expenses$ 187,500$$16,500$150,000$385,000$ 583,500$$ 625,000$ 148,500$ 156,000723,500Earnings before interest and taxes (EBIT)$830,100Less interest65,20075,000$ 518,300Pre-tax earningsTaxes (25%)$(7,500)$755,100$ 129,575$(1,875)2$188,775Net Income$ 388,725$(5,625)566,325Notes:Computron has no amortization charges.a

Ratio analysis is evaluating the information of the company using relativeness with the other data.

James Madison was brought in as assistant to Computron’s chairman, who had the task of getting the company back into a sound financial position. Madison must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions to take. Your assignment is to help her answer the following questions, using the recent and projected financial information shown next. Provide clear explanations, not yes or no answers. Calculate the profit margin? operating profit margin? basic earning power (BEP)? return on assets (ROA)? and return on equity (ROE). What can you say about these ratios?

James Madison was brought in as assistant to Computron’s chairman, who had the task of getting the company back into a sound financial position. Madison must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions to take. Your assignment is to help her answer the following questions, using the recent and projected financial information shown next. Provide clear explanations, not yes or no answers. Calculate the profit margin? operating profit margin? basic earning power (BEP)? return on assets (ROA)? and return on equity (ROE). What can you say about these ratios?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 10MCQ

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