AC/300

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• P2-6A
Compute these values and ratios for 2013 and 2014.
a. Earnings per share. The net income earned by each share of common stock; computed as net income less preferred dividends divided by the average common shares outstanding.
2013 – Work Shown 60,000(net income) / 30,000 (shares outstanding)
Answer=2
2014 Work Shown 70,000 (net income) / 33,000(shares outstanding)
Answer is 2.121

b. Working capital.
Current assets − Current liabilities
2013 working capital=20,000+62,000+73,000-70,000
2013=85,000

2014 working capital=28,000 + 70,000+ 90,000 – 75,000
2014=113000

c. Current ratio
2013 Answer2.2:1 Work Shown 155,000(current assets)/70,000 (current liability)
2014 Answer 2.5:1 Work Shown 188,000/75,000

d. Debt to assets ratio.
Total debt/total assets
2013 160000/685000=0.23
2014 155000/760000=0.20
e. Free cash flow
Cash provided by operations – Capital expenditures – Cash dividends
2013 Free Cash flow= $56,000- $38,000- $15,000=$3000
2014 Free Cash flow= $82,000- $45,000- $20,000=$17000

f. Earnings per share improved from 2 in 2013 to 2.121 in 2014

Working capital increased from 85000 in 2014 to 133000 in 2015
Current ratio improved further from 2.2:1 in 2013 to 2.5 in 2014
Average debt reduced in 2014
Free cash flow increased $3000 in 2013 to $17000 in 2014
• P13-2A
a. Earnings per share
Earnings per share. = $ 218,000 /58000=3.75
(b) Return on common stockholders’ equity.
218,000/ (603,400+465,400)/2=40.8%
(c) Return on assets.
218000/ (1,026,900+852,800)/2=23.19%
(d) Current ratio.
Current ratio=current assets/current liabilities
377,900/ 203,500=1.857
(e) Accounts receivable turnover.
$1,849,000/ (117,800+102,800)/2=16.76
(f) Average collection period.
365/16.16=21.77days
(g) Inventory turnover.
1,058,540/ (126,000+115,500)/2=8.766
(h) Days in inventory.
365/8.766=41.64
(I)Times interest earned.
(218000+ 92,000+22000)/22000=15.09

(j) Asset turnover.
$1,890,540/ ($1,026,900+$852,800)/2=2.01153
(k) Debt to assets.
423,500/1,026,900=41.24
(l) Current cash debt coverage.
$220,000/ (187400+203500)/2=1.127
(m) Cash debt coverage.
$220,000/ (423,500+387,400)/2=0.533
(n) Free cash flow.
$220,000-136000-70000=$14000