Please complete problem 15-16 see attached file

Please complete problem 15-16 see attached file

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Student Name:
Kevin Buccola
Class:
ACC-350
Problem 15-16
HEDRICK COMPANY
Rates of Return
1a.
This Year
Last Year
Net income
Add after-tax cost of interest:
Total
Average total assets
Return on total assets
1b.
Net income
Less preferred dividends
Net income remaining for common
Average total stockholders’ equity
Less average preferred stock
Average common equity
Return on common equity
HEDRICK COMPANY
Stockholders’ Well Being
2a.
Net income remaining for common
Avg. number of common shares outstanding
Earnings per share
2b.
Dividends per share
Market price per share
Dividend yield ratio
2c.
Dividends per share
Earnings per share
Dividend payout ratio
2d.
Market price per share
Earnings per share
Price-earnings ratio
2e.
Stockholders’ equity
Less preferred stock
Common stockholders’ equity
Number of common shares
Book value per share
2f.
Gross margin
Sales
Gross margin percentage
3.
HEDRICK COMPANY
Ratios
This Year
Last Year
Working capital
Current ratio
Acid-test ratio
Average collection period
Average sales period
Debt-to-equity ratio
Times interest earned

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Given Data SP15-16:
Requested loan amount
$1,000,000
HEDRICK COMPANY
Comparative Balance Sheet
This Year
Last Year
Assets
Current assets:
Cash
$320,000
$420,000
Marketable securities

100,000
Accounts receivable, net
900,000
600,000
Inventory
1,300,000
800,000
Prepaid expenses
80,000
60,000
Total current assets
2,600,000
1,980,000
Plant and equipment, net
3,100,000
2,980,000
Total assets
$5,700,000
$4,960,000
Liabilities and Stockholders’ Equity
Liabilities:
Current liabilities
$1,300,000
$920,000
Bonds payable, 10%
1,200,000
1,000,000
Total liabilities
2,500,000
1,920,000
Stockholders’ equity:
Preferred stock, 8%, $30 par value
600,000
600,000
Common stock, $40 par value
2,000,000
2,000,000
Retained earnings
600,000
440,000
Total stockholders’ equity
3,200,000
3,040,000
Total liabilities and stockholders’ equity
$5,700,000
$4,960,000
HEDRICK COMPANY
Comparative Income Statement and Reconciliation
This Year
Last Year
Sales (all on account)
$5,250,000
$4,160,000
Cost of goods sold
4,200,000
3,300,000
Gross margin
1,050,000
860,000
Selling and administrative expenses
530,000
520,000
Net operating income
520,000
340,000
Interest expense
120,000
100,000
Net income before taxes
400,000
240,000
Income taxes (30%)
120,000
72,000
Net income
280,000
168,000
Dividends paid:
Preferred stock
48,000
48,000
Common stock
72,000
36,000
Total dividends paid
120,000
84,000
Net income retained
160,000
84,000
Retained earnings, beginning of year
440,000
356,000
Retained earnings, end of year
$600,000
$440,000
Tax rate
30%
Percentage increase in sales
25%
Common stock price, last year
$20
Common stock price, this year
$36
Typical ratios:
Current ratio
2.3
Acid-test ratio
1.2
Average collection period
31 days
Average sale period
60 days
Return on assets
9.5%
Debt-to-equity ratio
0.65
Times interest earned ratio
5.7
Price-earnings ratio
10
Total assets beginning last year
$4,320,000
Stockholders’ equity beginning last year
$3,016,000
Accounts receivable, beginning of last year
$520,000
Inventory, beginning of last year
$640,000

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