Income Statement – Fiction, INC Sales 2,000,000 Cost of goods sold 1,400,000 Gro
ID: 2766375 • Letter: I
Question
Income Statement – Fiction, INC
Sales 2,000,000
Cost of goods sold 1,400,000
Gross Profit 600,000
Operating expenses
Selling & Marketing 100,000
Administrative 80,000
Depreciation 50, 000
Total operating expenses 230,000
Operating income (operating profits) 370, 000
Interest expense 50,000
Earnings before tax 320, 000
Income taxes 80,000
Net Income 240,000
Total number of sharing outstanding= 100, 000
Current market share = $41.40
Earnings per share (EPS) = 2.40
Dividends per share = $1.10
Balance Sheet – Fiction, INC
Assets
Cash 150,000
Accounts receivables 250, 000
Inventory 500,000
Total Current Assets 900,000
Gross planet & equip 2,200,000
Less accumulated depreciation 650,000
Net property, plant & equip 1,550,000
Total assets 2,450,000
Debt & Equity
Account Payable 145,000
Accruals 90,000
S. T. Note 310,000
Total Current Liabilities 545,000
Long-term debt 625,000
Total debt 1,170,000
Common stockholders equity
Common Stockholder equity 100,000
Paid-In capital 300,000
Retained earnings 880,000
Total common equity 1,280,000
Total liabilities & equity 2,450,000
· What is the times interest earned (TIE) of this firm?
· What is the total debt ratio of this firm?
· What is the return on equity (ROE) of this firm?
· What is the return on assets (ROA) of this firm?
· What is the market-to-book ratio of this firm?
· What is the price-to-earnings (P/E) ratio of this firm?
Explanation / Answer
P/E ratio = Price/ Earning ratio = $41.40/2.40 = 17.25
Market to book ratio = $ 41.40/12.80 = 3.23
where Book value = 1280000/100000 = 12.80
Debt to Equity ratio = 625000/1280000 = 0.49
Return on Equity = Net Profit available for equity shareholders / Equity *100
240000/(1280000-240000)*100 = 23.08%