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Chapter 2: 8BP b (page 79)
Easter Egg and Poultry Company has \(2,000,000 in assets and \)1,400,000 of debt. It reports net income of $200,000.
b. What is its return on stockholders鈥� equity?
The return on stockholder鈥檚 equity of the company is 33.33%
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Easter Egg and Poultry Company has \(2,000,000 in assets and \)1,400,000 of debt. It reports net income of $200,000.
c. If the firm has an asset turnover ratio of 2.5 times, what is the profit margin
(return on sales)?
Inflation can have significant effects on income statements and balance sheets, and therefore on the calculation of ratios. Discuss the possible impact of inflation on the following ratios, and explain the direction of the impact based on your assumptions. (LO3-5)
c. Fixed asset turnover
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.
c. Now assume income increased by 10 percent each year. What effect would this have on your preceding answers? (A comment is all that is necessary.)
Fill in the blank spaces with categories 1 through 7:
1. Balance sheet (BS)
2. Income statement (IS)
3. Current assets (CA)
4. Fixed assets (FA)
5. Current liabilities (CL)
6. Long-term liabilities (LL)
7. Stockholders鈥� equity (SE)
Indicate whether item is on Balance sheet (BS) or Income statement (IS) | If on Balance sheet, designate which category | Item |
Accounts receivable | ||
Retained earnings | ||
Income tax expense | ||
Accrued expense | ||
Cash | ||
Selling and administrative expenses | ||
Plant and equipment | ||
Operating expenses | ||
Marketable securities | ||
Interest expense | ||
Sales | ||
Notes payable (6 month) | ||
Bonds payable, maturity 2019 | ||
Common stock | ||
Depreciation expense | ||
Inventories | ||
Capital in excess of par value | ||
Net income (earning after tax) | ||
Income tax payable |
Quantum Technology had \(669,000 of retained earnings on December 31, 20X2. The company paid common dividends of \)35,500 in 20X2 and had retained earnings of $576,000 on December 31, 20X1. How much did Quantum Technology earn during 20X2, and what would earnings per share be if 47,400 shares of common stock were outstanding?
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