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2 Sep 2018

1. Which of the following is a solvency ratio?

A. Debt ratio

B. Earnings per share

C. Gross profit percentage

D. Cash conversion cycle

2. Two measures that are often looked at in valuing a businessare:

A. Price Earnings Ratio and Dividend per Share.

B. Price Earnings Ratio and Dividend Yield.

C. Earnings per Share and Dividend Yield.

D. Earnings per Share and Dividend per Share.

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Jarrod Robel
Jarrod RobelLv2
5 Sep 2018

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Deere & Co. manufactures and distributes farm andconstruction machinery that it sells around the world. In additionsto its manufacturing operations, Deere & Co.'s credit divisionloans money to customers to finance the purchase of their farm andconstruction equipment. The following information is available forthree recent years (in millions except per share amounts): Year 3 Year 2 Year 1
Net Income (loss) $1,865 $874 $2,053
Preferred dividends $0.00 $0.00 $0.00
Interest expense $811 $1,042 $1,137

Share outstanding for

computing earnings per share

 424 423 431
Cash dividends per share $1.16 $1.12 $1.06
Average total assets $42,200 $39,934 $38,655
Average stockholders' equity $5,555 $5,676 $6,844
Average stock price per share $60.95 $47.06

$58.01

1. Calculate the following ratios for each year:

a. Rate earned on total assets

b. Rate earned on stockholders' equity

c. Earnings per share

d. Dividend yield

e.Price-earnings ratio
2. What is the ratio of average liabilities to averagestockholders' equity for Year 3?
3. Based on these data, evaluate Deere & Co.'sperformance.

PROBLEM 15-13 Effects of Transactions on Various Financial Ratios (L015-2, L015-3, L015-4, LO15-5, L015-6] In the right-hand column below, certain financial ratios are listed. To the left of each ratio is a busi- ness transaction or event relating to the operating activities of Delta Company (each transaction should be considered independently). Business Transaction or Event Ratio Current ratio Acid-test ratio Return on equity Times interest earned Current ratio Dividend payout ratio Inventory turnover ratio Debt-to-equity ratio Accounts receivable turnover ratio 1. Declared a cash dividend. 2. Sold inventory on account at cost. 3. Issued bonds with an interest rate of 8%. The company's return on assets is 10%. 4. Net income decreased by 10% between last year and this year. Long-term debt remained unchanged. 5. Paid a previously declared cash dividend. 6. The market price of the company's common stock dropped from $24.50 to $20.00. The dividend paid per share remained unchanged. 7. Obsolete inventory totaling $100,000 was written off as a loss. 8. Sold inventory for cash at a profit. 9. Changed customer credit terms from 2/10, n/30 to 2/15. n/30 to comply with a change in industry practice. 10. Issued a stock dividend to common stockholders. 11. The market price of the company's common stock increased from $24.50 to $30.00 12. Paid $40,000 on accounts payable. 13. Issued a stock dividend to common stockholders. 14. Paid accounts payable. 15. Purchased inventory on account. 16. Wrote off an uncollectible account against the Allowance for Bad Debts. 17. The market price of the company's common stock increased from $24.50 to $30.00. Earnings per share remained unchanged. 18. The market price of the company's common stock increased from $24.50 to $30.00. The dividend paid per share remained unchanged. Book value per share Book value per share Working capital Earnings per share Debt-to-equity ratio Acid-test ratio Current ratio Price-earnings ratio Dividend yield ratio Required: Indicate the effect that each business transaction or event would have on the ratio listed opposite to it. State the effect in terms of increase, decrease, or no effect on the ratio involved, and give the reason for your answer. In all cases, assume that the current assets exceed the current liabilities both before and after the event or transaction. Use the following format for your Effect on Ratio Reason for Increase, Decrease, or No Effect 1. Etc.

The following information pertains to Parsons Co.: Preferredstock, cumulative: Par value per share $100 Dividend rate 8% Sharesoutstanding 9,000 Dividends in arrears none Common stock: Par valueper share $10 Shares issued 130,000 Dividends paid per share $2.10Market price per share $48 Additional paid-in capital $480,000Unappropriated retained earnings (after closing) $250,000 Retainedearnings appropriated for contingencies $320,000 Common treasurystock: Number of shares 9,000 Total cost $250,000 Net income$616,000 Compute (assume no changes in balances during the pastyear): (Round per share and ratios to 2 decimal places, e.g. $15.75or 15.75%.) (a) Total amount of stockholders' equity in the balancesheet $ (b) Earnings per share of common stock $ per share (c) Bookvalue per share of common stock $ per share (d) Payout ratio ofcommon stock % (e) Return on common stock equity %

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