102) Put an X in the appropriate box to show how each of the following items would be classified:
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Liquidity
ratio
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Solvency
ratio
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Profitability
ratio
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Market
indicator
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1
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Current ratio
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2
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Debt-to-equity ratio
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3
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Return on assets
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4
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Earnings per share
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5
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Return on equity
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6
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Asset turnover ratio
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7
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Gross profit ratio
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8
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Price-earnings ratio
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9
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Inventory turnover ratio
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10
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Dividend yield ratio
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103) Use the information provided to analyze the profitability of T-Shirt City using the following ratios: return on assets, return on equity, gross profit ratio, and earnings per share. T-Shirt City has no preferred stock.
Sales
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$ 350,000
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Gross profit
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206,500
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Net income
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115,000
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Interest expense
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2,875
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Average total assets
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875,000
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Average total shareholders' equity
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500,000
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Weighted-average common shares outstanding
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25,000
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104) Use the information provided to analyze the stock of T-Shirt City using the following ratios: earnings per share, price/earnings ratio, and dividend yield. T-Shirt City has no preferred stock.
Net income
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$115,000
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Interest expense
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$2,875
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Market price per share
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$35.72
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Dividends per share
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$0.80
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Weighted-average common shares outstanding
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25,000
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Little Company wants to buy a new warehouse. Right now, its balance sheet looks like this:
Little Company
Balance Sheet
November 30, 2012
Cash$12,000Current liabilities$ 4,000
Accounts receivable2,000Long-term liabilities10,000
Inventory3,000
Property, plant & equipment 10,000Common stock1,000
Retained earnings 12,000
Total$27,000Total$27,000
105) Refer to the balance sheet above.
a. What is Little Company's current ratio now?
b. If Little Company buys a $10,000 warehouse by paying $1,000 down and signing a ten-year mortgage note for the remainder, what will Little Company's current ratio be?
c. If Little Company buys a $10,000 warehouse by paying cash for the full amount, what will Little Company's current ratio be?
d. Is it ethical to structure business transactions so that the company's ratios look as good as possible?