1. Calculate Computron’s market value ratios—that is, its price/earnings ratio and its market/book ratio. What do these ratios tell you about investors’ opinions of the company? 2. Use the DuPont equation to provide a summary and overview of Computron’s financial condition. What are the firm’s major strengths and weaknesses?
1. Calculate Computron’s market value ratios—that is, its price/earnings ratio and its market/book ratio. What do these ratios tell you about investors’ opinions of the company? 2. Use the DuPont equation to provide a summary and overview of Computron’s financial condition. What are the firm’s major strengths and weaknesses?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
1. Calculate Computron’s market value ratios—that is, its price/earnings ratio and its market/book ratio.
What do these ratios tell you about investors’ opinions of the company?
2. Use the DuPont equation to provide a summary and overview of Computron’s financial condition. What
are the firm’s major strengths and weaknesses?
![Assignment 1
Donna Jamison was recently hired a financial analyst by Computron Industries, a manufacturer of
electronic components. Her first task was to conduct a financial analysis of the firm covering the last two
years. To begin, she gathered the following financial statements and other data.
Balance Sheets
Assets
Cash
Accounts receivable
Inventories
Total current assets
Gross fixed assets
Less accumulated depreciation
Net fixed assets
Total assets
Liabilities and Equity
Accounts payable
Notes payable
Accruals
Total current liabilities
Long-term debt
Common stock (100,000 shares)
Retained earnings
Total equity
Total liabilities and equity
(continued)
$
2019
52,000
402,000
836,000
$1,290,000
527,000
166,200
$360,800
$1,650.800
$ 175,200
225,000
140,000
$540,200
424,612
460,000
225,988
$ 685,988
$1,650.800
$
2018
57,600
351,200
715,200
$1,124,000
491,000
146,200
$ 344,800
$1,468,800
$ 145,600
200,000
136,000
$ 481,600
323,432
460,000
203,768
$ 663,768
$1,468,800
Income Statements
Sales
Cost of goods sold
Other expenses
Depreciation
Total operating costs
EBIT
Interest expense
EBT
Taxes (40%)
Net income
EPS
Statement of Cash Flows (2019)
Operating Activities
Net income
Other additions (sources of cash)
Depreciation
Increase in accounts payable
Increase in accruals
Subtractions (uses of cash)
Increases in accounts receivable
Increase in inventories
Net cash flow from operations
Long-Term Investing Activities
Investment in fixed assets
Financing Activities
Increase in notes payable
Increase in long-term debt
Payment of cash dividends
Net cash flow from financing
Net reduction in cash account
Cash at beginning of year
Cash at end of year
2019
$3,850,000
(3,250,000)
(430,300)
(20,000)
$3,700,300
$ 149,700
( 76,000)
$ 73,700
(29,480)
$ 44,220
$0.442
(continued)
$ 44,220
20,000
29,600
4,000
(50,800)
(120,800)
$ 25,000
101,180
(22,000)
2018
$3,432,000
(2,864,000)
(340,000)
(18,900)
$3,222,900
$ 209,100
(62,500)
$ 146,600
( 58,640)
$ 87,960
$0.880
$( 73,780)
$( 36,000)
$104,180
$( 5,600)
57,600
$ 52,000
Other Data
December 31 stock price
Number of shares
Dividends per share
Lease payments
Industry average data for 2019:
Ratio
Current
Quick
Inventory turnover
Days sales outstanding (DSO)
Fixed assets turnover
Total assets turnover
Debt ratio
TIE
Fixed charge coverage
Net profit margin
ROA
ROE
Price/earnings
Market/book
2019
$6.00
100,000
$ 0.22
$40,000
2018
$8.50
100,000
$0.22
$40,000
Industry Average
2.7x
1.0x
6.0x
32.0 days
10.7x
2.6x
50.0%
2.5x
2.1x
3.5%
9.1 %
18.2%
14.2x
1.4x](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6284458a-c451-4ba7-ab77-93b2b1dd91dd%2F2269034a-1c95-4551-a76c-00be4c23d241%2F27v2gcs_processed.png&w=3840&q=75)
Transcribed Image Text:Assignment 1
Donna Jamison was recently hired a financial analyst by Computron Industries, a manufacturer of
electronic components. Her first task was to conduct a financial analysis of the firm covering the last two
years. To begin, she gathered the following financial statements and other data.
Balance Sheets
Assets
Cash
Accounts receivable
Inventories
Total current assets
Gross fixed assets
Less accumulated depreciation
Net fixed assets
Total assets
Liabilities and Equity
Accounts payable
Notes payable
Accruals
Total current liabilities
Long-term debt
Common stock (100,000 shares)
Retained earnings
Total equity
Total liabilities and equity
(continued)
$
2019
52,000
402,000
836,000
$1,290,000
527,000
166,200
$360,800
$1,650.800
$ 175,200
225,000
140,000
$540,200
424,612
460,000
225,988
$ 685,988
$1,650.800
$
2018
57,600
351,200
715,200
$1,124,000
491,000
146,200
$ 344,800
$1,468,800
$ 145,600
200,000
136,000
$ 481,600
323,432
460,000
203,768
$ 663,768
$1,468,800
Income Statements
Sales
Cost of goods sold
Other expenses
Depreciation
Total operating costs
EBIT
Interest expense
EBT
Taxes (40%)
Net income
EPS
Statement of Cash Flows (2019)
Operating Activities
Net income
Other additions (sources of cash)
Depreciation
Increase in accounts payable
Increase in accruals
Subtractions (uses of cash)
Increases in accounts receivable
Increase in inventories
Net cash flow from operations
Long-Term Investing Activities
Investment in fixed assets
Financing Activities
Increase in notes payable
Increase in long-term debt
Payment of cash dividends
Net cash flow from financing
Net reduction in cash account
Cash at beginning of year
Cash at end of year
2019
$3,850,000
(3,250,000)
(430,300)
(20,000)
$3,700,300
$ 149,700
( 76,000)
$ 73,700
(29,480)
$ 44,220
$0.442
(continued)
$ 44,220
20,000
29,600
4,000
(50,800)
(120,800)
$ 25,000
101,180
(22,000)
2018
$3,432,000
(2,864,000)
(340,000)
(18,900)
$3,222,900
$ 209,100
(62,500)
$ 146,600
( 58,640)
$ 87,960
$0.880
$( 73,780)
$( 36,000)
$104,180
$( 5,600)
57,600
$ 52,000
Other Data
December 31 stock price
Number of shares
Dividends per share
Lease payments
Industry average data for 2019:
Ratio
Current
Quick
Inventory turnover
Days sales outstanding (DSO)
Fixed assets turnover
Total assets turnover
Debt ratio
TIE
Fixed charge coverage
Net profit margin
ROA
ROE
Price/earnings
Market/book
2019
$6.00
100,000
$ 0.22
$40,000
2018
$8.50
100,000
$0.22
$40,000
Industry Average
2.7x
1.0x
6.0x
32.0 days
10.7x
2.6x
50.0%
2.5x
2.1x
3.5%
9.1 %
18.2%
14.2x
1.4x
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