FINANCIAL ACCOUNTING: TOOLS FOR BUSINES
9th Edition
ISBN: 9781119595649
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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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.
(c) Compute free cash flow for each year, and comment on the changes.
2018
2017
Current assets
$ 54,000
$ 36,000
Total assets
240,000
205,000
Current liabilities
22,000
30,000
Total liabilities
72,000
100,000
Net income
90,000
50,000
Net cash provided by operating activities
100,000
56,000
Preferred dividends
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…
a) Calculate the following ratios for 2016 and 2015, showing detailed calculations as to how you arrive at each number.
A ROE
B Gross profit margin
C Total asset turnover
D Inventory turnover
E Current ratio
F Debt-to-equity
G Interest coverage ratio.
b) Using the financial statements and the ratios calculated above (and any other ratios you like to calculate), discuss the performance of Cobham PLC in 2016.
c) Critically discuss the need for the public limited companies to prepare a Statement of Cash Flows and explain the usefulness of the information contained therein from the perspective of a financial analyst.
Cuero Co. reported a net loss of $30,000 for 2015, yet its cash balance increased during the year. Which financial statement should Cuero’s management refer to for an explanation of this situation?
a. Balance sheetb. Income statementc. Statement of Retained Earnings
d. Statement of Cash Flows
Chapter 2 Solutions
FINANCIAL ACCOUNTING: TOOLS FOR BUSINES
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