Case 1 Given the following financial statements historical ratios, and industry averages, calculate Stering Company's financial ratios for the most recent year. (Assume a 365-day year.) Sterling Company Income Statement for the Year Ended December 31, 2012 I D.0000 7.500,.000 2500.000 Sales reverue Less Cost of Goods Sold Gross Profits Less: Operating expenses Selling espense Gereral and admiristralive expene 300.000 650.000 50.000 Lease espense Depreciation expense 200.000 Total operaling espense Operating profits Less Irterest erpense 1200.000 1300,000 200.000 Net profit before taxes Less Taxes (rale - 40) Net profit after taxes 100.000 440.000 660.000 Less: Preferred stock dvidenda 50.000 Eamrings avalable for common stockholders 610.000 Earings per share Sterling Company Bal arnce Sheet as of December 31, 2012 Assets Liabilities & Stockholdera' Equliy Accourts payable Notes payable Accruals Cash 200.000 s00.000 Marketable Securites Accounts receivable 50.00 200.000 800.000 0.000 1200,000 3.000.000 Inventories 950.000 Taal currert liabilities Total current assets 2000.000 Gros fixed assets (at cost) Long-term debt (include financial leases) Tolal liabilities 20000 4.200,000 300000 L000.000 Preferred stock (25,000 shares. $2 dividend) Common stiock (200.000 shares at $3 par) Paidin capital in excess of par value-common Less Accumulated depreciation Net fired asseta 9.000.000 600.000 Other assets 1000.000 12.00000 5.00.000 Total assets Relained earrings 1000.000 Total stockholders' equty Total liabilities & stockholders' equity 7.800.000 12.000.000
Case 1 Given the following financial statements historical ratios, and industry averages, calculate Stering Company's financial ratios for the most recent year. (Assume a 365-day year.) Sterling Company Income Statement for the Year Ended December 31, 2012 I D.0000 7.500,.000 2500.000 Sales reverue Less Cost of Goods Sold Gross Profits Less: Operating expenses Selling espense Gereral and admiristralive expene 300.000 650.000 50.000 Lease espense Depreciation expense 200.000 Total operaling espense Operating profits Less Irterest erpense 1200.000 1300,000 200.000 Net profit before taxes Less Taxes (rale - 40) Net profit after taxes 100.000 440.000 660.000 Less: Preferred stock dvidenda 50.000 Eamrings avalable for common stockholders 610.000 Earings per share Sterling Company Bal arnce Sheet as of December 31, 2012 Assets Liabilities & Stockholdera' Equliy Accourts payable Notes payable Accruals Cash 200.000 s00.000 Marketable Securites Accounts receivable 50.00 200.000 800.000 0.000 1200,000 3.000.000 Inventories 950.000 Taal currert liabilities Total current assets 2000.000 Gros fixed assets (at cost) Long-term debt (include financial leases) Tolal liabilities 20000 4.200,000 300000 L000.000 Preferred stock (25,000 shares. $2 dividend) Common stiock (200.000 shares at $3 par) Paidin capital in excess of par value-common Less Accumulated depreciation Net fired asseta 9.000.000 600.000 Other assets 1000.000 12.00000 5.00.000 Total assets Relained earrings 1000.000 Total stockholders' equty Total liabilities & stockholders' equity 7.800.000 12.000.000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Notes:
a. The firm has an 8-year financial lease requiring annual beginning-of-year payments of $50,000. Five years of the lease have yet to run.
b. Annual credit purchases of $6,200,000 were made during the year.
c. The annual principal payment on the long-term debt is $100,000.
d. On December 31, 2012, the firm's common stock closed at $39.50 per share.
Questions:
1. What is the fixed payment coverage ratio?
2. What is the return on total assets?
3. What is the return on total equity?
Transcribed Image Text:Case 1
Given the following financial statements historical ratios, and industry averages, calculate Stering Company's financial ratios for the
most recent year. (Assume a 365-day year.)
Sterling Company Income Statement for the Year Ended December 31, 2012
I D.0000
7.500,.000
2500.000
Sales reverue
Less Cost of Goods Sold
Gross Profits
Less: Operating expenses
Selling espense
Gereral and admiristralive expene
300.000
650.000
50.000
Lease espense
Depreciation expense
200.000
Total operaling espense
Operating profits
Less Irterest erpense
1200.000
1300,000
200.000
Net profit before taxes
Less Taxes (rale - 40)
Net profit after taxes
100.000
440.000
660.000
Less: Preferred stock dvidenda
50.000
Eamrings avalable for common stockholders
610.000
Earings per share
Sterling Company Bal arnce Sheet as of December 31, 2012
Assets
Liabilities & Stockholdera' Equliy
Accourts payable
Notes payable
Accruals
Cash
200.000
s00.000
Marketable Securites
Accounts receivable
50.00
200.000
800.000
0.000
1200,000
3.000.000
Inventories
950.000
Taal currert liabilities
Total current assets
2000.000
Gros fixed assets (at cost)
Long-term debt (include financial leases)
Tolal liabilities
20000
4.200,000
300000
L000.000
Preferred stock (25,000 shares. $2 dividend)
Common stiock (200.000 shares at $3 par)
Paidin capital in excess of par value-common
Less Accumulated depreciation
Net fired asseta
9.000.000
600.000
Other assets
1000.000
12.00000
5.00.000
Total assets
Relained earrings
1000.000
Total stockholders' equty
Total liabilities & stockholders' equity
7.800.000
12.000.000
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