Quantitative Problem: Rosnan Industries\' 2018 and 2017 balance sheets and incom
ID: 2779626 • Letter: Q
Question
Quantitative Problem: Rosnan Industries' 2018 and 2017 balance sheets and income statements are shown below Balance Sheets: 2018 2017 $95 300 350 $745 1,490 $2,235 Cash and equivalents Accounts receivable Inventories $110 275 375 $760 2,000 $2,760 Total current assets Net plant and equipment Total assets $85 50 185 $320 290 1,225 400 $2,235 Accounts payable Accruals Notes payable $150 75 160 $385 450 1,225 700 $2,760 Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and equityExplanation / Answer
1.Current ratio = current assets/ current liabilities
= $ 760/ $ 385 = 1.974026 or 1.97
2.Net profit margin = net profit/total revenue
=$353/$2,000
=17.65%
3. True as Net profit margin is more than industry average profit
4.EPS= PAT/shares outstanding
=$353/100
=$3.53
P/ E Ratio= Price/ EPS
=$25/$3.53
=7.08 times
5.
Begining shareholders' equity=Common Stock + Retained Earnings
=$1,225 +$400
=$1,625
Ending shareholders' equity=Common Stock + Retained Earnings
=$1,225 +$700
=$1,925
Avg Shareholders’ equity = Beginning Shareholder’s Equity + Ending Shareholder’s Equity/2
=$1,625 +$1,925/2
=$1,775
Avg Assets= Beginning Assets + Ending Assets /2
=$2,235+$2,760/2
=$2,497.50
ROE = (net income / sales) x (sales / assets) x (assets / shareholders' equity)
=($353/$2,000) x ($2,000 /$2,497.50) x ($2,497.50 / $1,775)
= 0.1765 x 0.800801 x 1.407042
= 0.198873
=19.89%