I need to find: ROI (IA = 18%) EPS ( IA=$4) P/E RATIO (IA =10) Explain the signi

Question

I need to find: ROI (IA = 18%)

EPS ( IA=$4)

P/E RATIO (IA =10)

Explain the significance of each of the above computations.

Beginning Inventory $100,000 Ending Inventory $120,000 Cost of Goods Sold $210,000 Cash = $100,000 Beginning A/R $200,000 Ending A/R $160,000 A/P $110,000 Notes Payable $200,000 Bonds Payable $500,000 Net Sales $2,000,000 Total Liabilities $2,000,000 Total Stockholders Equity $4,000,000 Net Income = $1,000,000 Net Income Before Income Tax = $800,000 Interest Expense $30,000 Interest Portion of Leases - $40,000 Income Tax Rate-20% Total Assets = $6,000,000 Preferred Dividends $100,000 Average Common Shares - 1,000,000 Market Price Per Share $5

Explanation / Answer

ROI is the rate of return on total investment.

EPS is the earnings available per share to equity shareholders

PE ratio is the measure of whether the share is overpriced or underpriced in the market.

Ans. ROI 0.17 ROI=Net income before tax/Total stockholders equity + Notes Payable + Bonds Payable EPS 0.54 EPS=Net income after tax-Preference Dividend/Average no of equity shares P/E ratio 9.26 P/E ratio=Market price per share/EPS

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