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Chapter 2: 25BP_a (page 83)
A firm has net income before interest and taxes of \(193,000 and interest expense of \)28,100.
a. What is the times-interest-earned ratio?
Times-interest-earned ratio of the company is 6.87.
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How is the income statement related to the balance sheet?
The Holtzman Corporation has assets of \(400,000, current liabilities of \)50,000, and long-term liabilities of \(100,000. There is \)40,000 in preferred stock outstanding; 20,000 shares of common stock have been issued.
a. Compute book value (net worth) per share.
b. If there is $22,000 in earnings available to common stockholders and
Holtzman鈥檚 stock has a P/E of 18 times earnings per share, what is the current
price of the stock?
c. What is the ratio of market value per share to book value per share?
A-Rod Fishing Supplies had sales of \(2,500,000 and cost of goods sold of \)1,710,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 6 percent of the total assets of $4,680,000. What was the firm鈥檚 operating profit?
In January 2007, the Status Quo Company was formed. Total assets were \(544,000, of which \)306,000 consisted of depreciable fixed assets. Status
Quo uses straight-line depreciation of \(30,600 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been \)29,000 per year each of the last 10 years. Other assets have not changed since 2007.
b. To what do you attribute the phenomenon shown in part a?
Precision Systems had sales of \(820,000, cost of goods of \)510,000, selling and administrative expense of \(60,000, and operating profit of \)103,000. What was the value of depreciation expense? Set this problem up as a partial income statement and determine depreciation expense as the 鈥減lug鈥� figure required to obtain the operating profit.
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