FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
19th Edition
ISBN: 9781119493624
Author: Kimmel
Publisher: WILEY
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Chapter 2, Problem 2.2DIE
(a)
To determine
Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).
Use the following formula to compute EPS:
To determine: (a) EPS of Corporation N for 2016 and 2017 and comment on the changes in comparison to its competitor, Corporation M.
(b)
To determine
Formula of current ratio:
Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.
Formula of debt to assets ratio:
To determine: (b) Current ratio and debt to assets ratio for 2016 and 2017.
(c)
To determine
Formula of free cash flow:
To determine: (c) Free cash flow of Corporation N for 2016 and 2017 and comment on the changes.
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Calculation and interpretation of ratios.
Data for White Star Limited:
Net operating profit after tax is $25 million (2018: $38 million).
1. Use the information above to calculate for 2019 and 2018:
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b current ratio
c quick ratio
d debt-to-equity ratio
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f earnings per share ratio.
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Comment on…
The following information is available for Tanaka Corporation.
Compute earnings per share for 2018 and 2017 for Tanaka, and comment on the change. Tanaka's primary competitor, Browning Corporation, had earnings per share of $1 per share in 2018. Comment on the difference in the ratios of the two companies.
(b) Compute the current ratio and debt to assets ratio for each year, and comment on the changes.
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2018
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Current assets
$ 54,000
$ 36,000
Total assets
240,000
205,000
Current liabilities
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Total liabilities
72,000
100,000
Net income
90,000
50,000
Net cash provided by operating activities
100,000
56,000
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6,000
6,000
Common dividends
3,000
1,500
Expenditures on property, plant, and equipment
27,000
12,000
Shares outstanding at beginning of year
40,000
30,000
Shares outstanding…
Use the information provided from Sapphire Ltd to calculate the ratios for 2022 (expressed to two decimal places) that would reflect each of the following:1. The profit of the company relative to sales after deducting the cost of sales.2. The ability of the company to profitably utilize its capital, which includes both debt and equity.3. The proportion of the total assets that are financed by total debt.4. The ability of the company to repay its short-term debts under distress conditions, on the assumption that inventories would have no value at all.5. The portion of the company's profit that is allocated to each outstanding ordinary share.6. An indication of the percentage of profit that has been put back into the company.
Chapter 2 Solutions
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
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