Match each ratio that follows to its use (items a – h). Items may be used more t
ID: 2445721 • Letter: M
Question
Match each ratio that follows to its use (items a – h). Items may be used more than once.
Clear All dividends per share current ratio quick ratio rate earned on common stockholders' equity ratio of sales to assets rate earned on total assets earnings per share (EPS) on common stock working capital price-earnings (P/E) ratio ratio of liabilities to stockholders' equity indicate future earnings prospects assess the effectiveness in the use of assets indicate the extent to which earnings are being distributed to common stockholders assess the profitability of the investment by common stockholders assess the profitability of the assets indicate the margin of safety to creditors indicate instant debt-paying ability indicate the ability to meet currently maturing obligationsExplanation / Answer
Solution:
(A). Dividend Per Share Caluculation:
Dividend Per Share = 5,00,000 / 1,000
= 500
(B). Current Ratio:
Current Assets = 4,00,000
Current Liabilities = 1,50,000
Current Ratio = 4,00,000 / 1,50,000
= 2.66
(C). Quick Ratio:
Accounts Receivables = 2,50,000
Cash = 3,00,000
Accounts Payables = 2,00,000
Quick Ratio = 2,50,000 + 3,00,000 / 2,00,000
= 2.75
(D). Rate/Return on Equity Share Holder's Equity:
Share Holder's Equity = 3,70,000
Net Income = 5,20,000
= 5,20,000 / 3,70,000
= 1.40
(E). Asset to Sale Ratio:
Sales Revenue = 5,40,000
Total Assets = 8,60,000
Asset to Sale = 8,60,000 / 5,40,000
= 1.59
(F). Return on Aset:
Net Income = 15,00,000
Total Assets = 14,00,000
Avg Assets = 14,00,000 / 2
= 7,00,000
ROA = 15,00,000 / 7,00,000
= 2.14
(G). Earning Per Share on Common Stock:
Net Income = 15,00,000
Avg Outstanding Shares = 4,75,000
Earning Per Share on Common Stock = 15,00,000 / 4,75,000
=3.15
(H). Working Capital Ratio:
Working Capital Ratio = 4,00,000 / 1,50,000
= 2.66
(I). Price Earnings Ratio:
The Island Corporation stock is currently trading at $50 a share and its earnings per share for the year is 5 dollars.
Price Earnings Ratio = $50 / 5
= $ 10
(J).
Dividend Per Share = Total DIvidend / No.of Shares