M14-1

Answer

Revenue = $1,665,000gross profit percentage = 44 %Gross profit percentage = Gross Profit/Net Sales
Gross Profit = Net sales - Cost of goods sold Gross profit percentage = (Net sales - Cost of goods sold)
/Net Sales Gross profit percentage x Net Sales = Net sales - Cost of goods sold Cost of goods sold = Net
sales - Gross profit percentage x Net Sales Cost of goods sold = 1,665,000 – 0.44 x 1,665,000 = $932,400

M14-8
Answer

Earnings per share (2011)= $9.50

Price of the Stock (2011) = $228

Earnings per share (2012)= $9.50 x 1.13 = $10.735

Price of the Stock (2012) = $228 x 1.13 = $257.64

E14-5
Answer

1 Profit margin A. Net Income (before extraordinary items) ÷ Net Sales

2 Inventory turnover ratio H. Cost of Goods Sold ÷ Average Inventory
3 Average collection period B. Days in Year ÷ Receivable Turnover Ratio
4 Dividend yield ratio L. Dividends per Share ÷ Market Price per Share
5 Return on equity C. Net Income ÷ Average Stockholders’ Equity
6 Current ratio G. Current Assets ÷ Current Liabilities
7 Debt-to-equity ratio K. Total Liabilities ÷ Stockholders’ Equity
8 Price/earnings ratio M. Current Market Price per Share ÷ Earnings per Share
9 Financial leverage E. Return on Equity − Return on Assets
percentage
10 Receivable turnover ratio I. Net Credit Sales ÷ Average Net Receivables
11 Average days’ supply of J. Days in Year ÷ Inventory Turnover Ratio
inventory
12 Earnings per share D. Net Income ÷ Average Number of Shares of Common Stock
Outstanding
13 Return on assets N. [Net Income + Interest Expense (net of tax)] ÷ AverageTotal
Assets
14 Quick ratio F. Quick Assets ÷ Current Liabilities
15 Times interest earned Q. (Net Income + Interest Expense + Income Tax Expense) ÷
Interest Expense
16 Cash coverage ratio O. Cash from Operating Activities (before interest and taxes) ÷
Interest Paid
17 Fixed asset turnover ratio P. Net Sales Revenue ÷ Net Fixed Assets
E14-9
Answer

Turnover for the accounts receivable = receivable turnover ratio

= Net Credit Sales / Average Net Receivables

= (76,476 x 0.9) /(( 6,629 + 5,725)/2) = 11.14

Turnover for the inventory = inventory turnover ratio

= Cost of Goods Sold / Average Inventory

Cost of goods sold = Net sales - Gross Profit

Gross Profit = Gross profit percentage x Net Sales

Cost of goods sold = Net sales - Gross profit percentage x Net Sales

= 76,476 - 76,476 x 0.52 = $36,708.48

Average Inventory=((6,819 + 6,291)/2)=$6,555

Turnover for the inventory = 36,708.48/ 6,555= 5.6

Average age of receivables = Days in a year / receivable turnover ratio

= 365 / 11.14 = 32.76 days

Average days’ supply of inventory = Days in a year / inventory turnover ratio

= 365 / 5.6 = 65.18 days

P14-5
Answer

Ratio Definition Price Warehouse

Company company
1. Profit margin A. Net Income (before extraordinary 0.1 0.12
items) ÷ Net Sales
2. Inventory turnover H. Cost of Goods Sold ÷ Average 2.56 9.05
ratio Inventory
3. Average collection B. Days in Year ÷ Receivable Turnover 44.09 51.88
period Ratio
4. Dividend yield ratio L. Dividends per Share ÷ Market Price 12.47 23.87
per Share
5. Return on equity C. Net Income ÷ Average 0.19 0.13
Stockholders’ Equity
6. Current ratio G. Current Assets ÷ Current Liabilities 1.41 8.18
7. Debt-to-equity ratio K. Total Liabilities ÷ Stockholders’ 0.69 0.16
Equity
8. Price/earnings ratio M. Current Market Price per Share ÷ 0.73 1.59
Earnings per Share
9. Financial leverage E. Return on Equity − Return on 0.04 -0.02
percentage Assets
10. Receivable turnover I. Net Credit Sales ÷ Average Net 8.28 7.04
ratio Receivables
11. Average days’ supply J. Days in Year ÷ Inventory Turnover 142.37 40.35
of inventory Ratio
12. Earnings per share D. Net Income ÷ Average Number of 23.18 9.43
Shares of Common Stock
Outstanding
13. Return on assets N. [Net Income + Interest Expense 0.15 0.15
(net of tax)] ÷ Average Total Assets
14. Quick ratio F. Quick Assets ÷ Current Liabilities 0.41 K7.37
15. Times interest earned Q. (Net Income + Interest Expense + 15.26 14.48
Income Tax Expense) ÷ Interest
Expense
16. Cash coverage ratio O. Cash from Operating Activities 1.24 0.14
(before interest and taxes) ÷ Interest
Paid
17. Fixed asset turnover P. Net Sales Revenue ÷ Net Fixed 5.32 2.63
ratio Assets