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FIN 357 Study Guide - Midterm Guide: Peg Ratio, Retained Earnings, Market Capitalization

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bronzehamster37
15 Oct 2018
School
UT-Austin
Department
Finance
Course
FIN 357
Professor
Miller

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Document Summary

Net working capital to total assets ratio = net working capital. Cash coverage ratio = ebit + depreciation expense. Days" sales in receivables = dso = average collection period = Days" payables outstanding = dpo = average payables period = (cid:885)(cid:888)(cid:887) days. Return on assets = roa = net income. Total assets = net profit margin total asset turnover. Return on equity = roe = net income. =net profit margin total asset turnover equity multiplier. Enterprise value = total market value of the stock + book value of all liabilities cash. Market capitalization = total market value of the stock = shares outstanding price per share. Ebitda ratio = enterprise value multiple = enterprise value. Retention ratio = plowback ratio = addition to retained earnings. Internal growth rate = (cid:883) (cid:4666)roa retention ratio(cid:4667) Sustainable growth rate = (cid:883) (cid:4666)roe retention ratio(cid:4667) 1 + r = (1 + r) (1 + h)

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Related Questions

Use the following information to answer the following questions.

ABC, Inc. Income Statement (in thousands)

December 31, 2014

Sales $200,000

Cost of goods sold 140,000

Gross profit on sales 60,000

Operating expenses 56,000

Operating income (EBIT) 4,000

Interest expense 1,000

Earnings before tax 3,000

Income tax 1,050

Net income available to common stockholders $1,950

Number of shares outstanding 1, 500

Market price per share $22

ABC, Inc. Balance Sheet (in thousands)

December 31, 2014

Assets

Cash $2,000

Accounts receivable 17,800

Inventories 8,700

Total current assets 28,500

Gross fixed assets 70,000

Accumulated depreciation 26,500

Net fixed assets 43,500

Total assets $72,000

Liabilities and Equity

Accounts payable $18,000

Accruals 13,350

Total current liabilities 31,350

Long-term debt 8,250

Total liabilities 39,600

Common stock (par value and paid in capital) 2,000

Retained earnings 30,400

Total stockholders' equity 32,400

Total liabilities and equity $72,000

Industry Key Ratios

Industry Average Ratios

Current ratio 1.1

Quick ratio 0.60

Days Sales Outstanding (DSO) 25 days

Fixed assets turnover 5.8

Total asset turnover 2.95

Liabilities-to-assets ratio 65%

Times-interest-earned 3.2

Net profit margin 1.3%

Return on equity 7.32%

Price/earnings ratio 20.38

Market/book ratio 3.19

Calculate current ratio and acid test ratio for the firm.

Calculate DSO, fixed assets turnover, and total asset turnover for the firm.

Calculate liabilities-to-assets ratio and times-interest-earned ratio for the firm.

Calculate net profit margin and return on equity for the firm.

Evaluate the performance of the firm in the following areas:

Liquidity management

Asset management

Debt management

Profitability management

When you explain the firm

SMOLIRA GOLF, INC.
Balance Sheets as of December 31, 2015 and 2016

2015 2016 2015 2016
Assets Liabilities and Owners’ Equity
Current assets Current liabilities
Cash $ 2,881 $ 2,757 Accounts payable $ 2,208 $ 2,710
Accounts receivable 4,712 5,671 Notes payable 1,805 2,226
Inventory 12,698 13,672 Other 101 118
Total $ 20,291 $ 22,100 Total $ 4,114 $ 5,054
Long-term debt $ 14,400 $ 17,160
Owners’ equity
Common stock and paid-in surplus $ 43,500 $ 43,500
Fixed assets Accumulated retained earnings 15,709 39,915
Net plant and equipment $ 57,432 $ 83,529 Total $ 59,209 $ 83,415
Total assets $ 77,723 $ 105,629 Total liabilities and owners’ equity $ 77,723 $ 105,629
SMOLIRA GOLF, INC.
2016 Income Statement
Sales $ 189,570
Cost of goods sold 127,303
Depreciation 5,223
EBIT $ 57,044
Interest paid 1,320
Taxable income $ 55,724
Taxes 19,503
Net income $ 36,221
Dividends $ 12,015
Retained earnings 24,206

Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profitability ratios as a percent.)

2015 2016
Short-term solvency ratios
a. Current ratio times times
b. Quick ratio times times
c. Cash ratio times times
Asset utilization ratios
d. Total asset turnover times
e. Inventory turnover times
f. Receivables turnover times
Long-term solvency ratios
g. Total debt ratio times times
h. Debt−equity ratio times times
i. Equity multiplier times times
j. Times interest earned ratio times
k. Cash coverage ratio times
Profitability ratios
l. Profit margin %
m. Return on assets %
n. Return on equity %

Some recent financial statements for Smolira Golf, Inc., follow.

SMOLIRA GOLF, INC.
Balance Sheets as of December 31, 2015 and 2016
2015 2016 2015 2016
Assets Liabilities and Owners’ Equity
Current assets Current liabilities
Cash $ 2,881 $ 2,757 Accounts payable $ 2,208 $ 2,710
Accounts receivable 4,712 5,671 Notes payable 1,805 2,226
Inventory 12,698 13,672 Other 101 118
Total $ 20,291 $ 22,100 Total $ 4,114 $ 5,054
Long-term debt $ 14,400 $ 17,160
Owners’ equity
Common stock and paid-in surplus $ 43,500 $ 43,500
Fixed assets Accumulated retained earnings 15,709 39,915
Net plant and equipment $ 57,432 $ 83,529 Total $ 59,209 $ 83,415
Total assets $ 77,723 $ 105,629 Total liabilities and owners’ equity $ 77,723 $ 105,629
SMOLIRA GOLF, INC.
2016 Income Statement
Sales $ 189,570
Cost of goods sold 127,303
Depreciation 5,223
EBIT $ 57,044
Interest paid 1,320
Taxable income $ 55,724
Taxes 19,503
Net income $ 36,221
Dividends $ 12,015
Retained earnings 24,206

Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profitability ratios as a percent.)

2015 2016
Short-term solvency ratios
a. Current ratio times times
b. Quick ratio times times
c. Cash ratio times times
Asset utilization ratios
d. Total asset turnover times
e. Inventory turnover times
f. Receivables turnover times
Long-term solvency ratios
g. Total debt ratio times times
h. Debt−equity ratio times times
i. Equity multiplier times times
j. Times interest earned ratio times
k. Cash coverage ratio times
Profitability ratios
l. Profit margin %
m. Return on assets %
n. Return on equity %