ESSENTIALS CORPORATE FINANCE + CNCT A.
9th Edition
ISBN: 9781259968723
Author: Ross
Publisher: MCG CUSTOM
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Textbook Question
Chapter 3, Problem 40QP
Market Value Ratios. Abercrombie & Fitch and American Eagle Outfitters (AEO), reported the following numbers (in millions) for fiscal year 2014. Calculate the earnings per share, market-to-book ratio, and price–earnings ratio for each company.
| Abercrombie | AEO | |
| Net income | $ 51.821 | $ 80.322 |
| Shares outstanding | 68.98 | 195.43 |
| Stock price | $ 24.81 | $ 13.84 |
| Total equity | $1,389.701 | $1,139.746 |
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Comparative financial statement data of Garfield, Inc. follow:
Market price of Garfield’s common stock: $69.36 at December 31, 2018, and $38.04 at December 31, 2017.
Common shares outstanding: 14,000 on December 31, 2018 and 12,000 on December 31, 2017 and 2016.
All sales are on credit.
Compute the following ratios for 2018 and 2017:
2018
2017
a. Current ratio
b. Cash ratio
c. Times-interest-earned ratio
d. Inventory turnover
e. Gross profit percentage
f. Debt to equity ratio
g. Rate of return on common stockholders’ equity
h. Earnings per share of common stock
i. Price/earnings ratio
Decide (a) whether Garfield’s ability to pay debts and to sell inventory improved or deteriorated during 2018 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.
Profitability ratios
The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 2017, 20Y6, and 20Y5:
December 31
20Y7
December 31
20Y6
December 31
20Y5
Total assets
$307,000
$277,000
$247,000
Notes payable (8% interest)
100,000
100,000
100,000
Common stock
40,000
40,000
40,000
Preferred 6% stock, $100 par
(no change during year)
Retained earnings
20,000
109,920
20,000
80,240
20,000
60,000
The 20Y7 net income was $30,880, and the 2016 net income was $21,440. No dividends on common stock were declared between 2015 and 2017. Preferred dividends were declared and paid in full in 2016 and 2017.
a. Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders' equity for the years 2016 and 2017. When required, round your answers to one decimal place.
20Y7
20Y6
Return on total assets
Return on stockholders' equity
Return on common stockholders' equity
%
%
%
%
%
%
b. The profitability ratios indicate…
Computing earnings per share, price/earnings ratio, and rate of return on common stockholders’ equity
Gullo Company reported these figures for 2018 and 2017:
Requirements
Compute Gullo Company’s earnings per share for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest cent.
Compute Gullo Company’s price/earnings ratio for 2018. Assume the company’s market price per share of common stock is $9. Round to two decimals.
Compute Gullo Company’s rate of return on common stockholders’ equity for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest whole percent.
Chapter 3 Solutions
ESSENTIALS CORPORATE FINANCE + CNCT A.
Ch. 3.1 - Why is it often necessary to standardize financial...Ch. 3.1 - Prob. 3.1BCQCh. 3.2 - What are the five groups of ratios? Give two or...Ch. 3.2 - Turnover ratios all have one of two figures as...Ch. 3.2 - Profitability ratios all have the same figure in...Ch. 3.2 - Given the total debt ratio, what other two ratios...Ch. 3.3 - Return on assets, or ROA, can be expressed as the...Ch. 3.3 - Return on equity, or ROE, can be expressed as the...Ch. 3.4 - What does a firms internal growth rate tell us?Ch. 3.4 - What does a firms sustainable growth rate tell us?
Ch. 3.4 - Why is the sustainable growth rate likely to be...Ch. 3.5 - Prob. 3.5ACQCh. 3.5 - Prob. 3.5BCQCh. 3.5 - Prob. 3.5CCQCh. 3.5 - Prob. 3.5DCQCh. 3 - Section 3.1A common-size balance sheet expresses...Ch. 3 - What are the categories of traditional financial...Ch. 3 - Prob. 3.3CCh. 3 - Prob. 3.4CCh. 3 - Prob. 3.5CCh. 3 - Current Ratio. What effect would the following...Ch. 3 - Current Ratio and Quick Ratio. In recent years,...Ch. 3 - Prob. 3CTCRCh. 3 - Financial Ratios. Fully explain the kind of...Ch. 3 - Standardized Financial Statements. What types of...Ch. 3 - Prob. 6CTCRCh. 3 - Prob. 7CTCRCh. 3 - Prob. 8CTCRCh. 3 - Industry-Specific Ratios. So-called same-store...Ch. 3 - Industry-Specific Ratios. There are many ways of...Ch. 3 - Prob. 11CTCRCh. 3 - Financial Statement Analysis. In the previous...Ch. 3 - Prob. 1QPCh. 3 - Calculating Profitability Ratios. Aguilera, Inc.,...Ch. 3 - Calculating the Average Collection Period. Ordonez...Ch. 3 - Calculating Inventory Turnover. Bobaflex...Ch. 3 - Calculating Leverage Ratios. Fincher, Inc., has a...Ch. 3 - Calculating Market Value Ratios. Rossdale, Inc.,...Ch. 3 - Prob. 7QPCh. 3 - DuPont Identity. Jiminy Cricket Removal has a...Ch. 3 - Calculating Average Payables Period. For the past...Ch. 3 - Equity Multiplier and Return on Equity. Shelton...Ch. 3 - Internal Growth. If Williams, Inc., has an ROA of...Ch. 3 - Sustainable Growth. If the Crash Davis Driving...Ch. 3 - Sustainable Growth. Based on the following...Ch. 3 - Prob. 14QPCh. 3 - Prob. 15QPCh. 3 - Calculating Financial Ratios. Based on the balance...Ch. 3 - DuPont Identity. Suppose that the Bethesda Mining...Ch. 3 - Prob. 18QPCh. 3 - Return on Assets. Beckinsale, Inc., has a profit...Ch. 3 - Calculating Internal Growth. The most recent...Ch. 3 - Calculating Sustainable Growth. For Shinoda...Ch. 3 - Total Asset Turnover. Kalebs Karate Supply had a...Ch. 3 - Return on Equity. Carroll, Inc., has a total debt...Ch. 3 - Market Value Ratios. Ames, Inc., has a current...Ch. 3 - Prob. 25QPCh. 3 - Enterprise ValueEBITDA Multiple. The market value...Ch. 3 - Prob. 27QPCh. 3 - Ratios and Fixed Assets. The Smathers Company has...Ch. 3 - Prob. 29QPCh. 3 - Prob. 30QPCh. 3 - Prob. 31QPCh. 3 - Calculating the Times Interest Earned Ratio. For...Ch. 3 - Return on Assets. A fire has destroyed a large...Ch. 3 - Prob. 34QPCh. 3 - SMOLIRA GOLF. INC. 2016 Income Statement Sales...Ch. 3 - Prob. 36QPCh. 3 - Market Value Ratios. Smolira Golf has 10,000...Ch. 3 - Interpreting Financial Ratios. After calculating...Ch. 3 - Growth and Profit Margin. Fulkerson Manufacturing...Ch. 3 - Market Value Ratios. Abercrombie Fitch and...Ch. 3 - Growth and Assets. A firm wishes to maintain an...Ch. 3 - Prob. 42QPCh. 3 - Prob. 43QPCh. 3 - Constraints on Growth. High Flyer, Inc., wishes to...Ch. 3 - Internal and Sustainable Growth Rates. Best Buy...Ch. 3 - Expanded DuPont Identity. Hershey Co. reported the...Ch. 3 - Ratios and Financial Planning at SS Air, Inc....Ch. 3 - Prob. 2CCCh. 3 - Prob. 3CCCh. 3 - Ratios and Financial Planning at SS Air, Inc....
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