Beta Corp. Statement of comprehensive income For the year ended December 31, 20X5 (in $'000s) 20X5 20X4 115,000 37,375 77,625 Sales 108,500 36,890 71,610 Cost of goods sold Gross profit Expenses: Operating expense Depreciation expense Advertising expense Interest expense Total expenses Profit or loss before tax Income tax expense 17,250 11,500 5,750 9,775 44,275 33,350 20,700 12,650 16,275 10,850 5,425 8,650 41,200 30,410 19,530 10,880 Profit or loss Beta Corp. Statement of financial position As at December 31, 20X5 (in '$000s) 20X5 20X4 Current assets: Cash A/R Inventory Capital assets Total assets 28,525 34,500 25,800 66,800 155,625 24,700 21,070 30,125 63.460 139.355 Current liabilities: Accounts payable Unearned revenue Current portion of long-term debt Long-term liabilities: Long-tem debt Shareholders' equity Total liabilities and shareholders' equity 35,680 27,800 13,108 33,177 29,580 3,952 37,450 41.587 155.625 26,350 46.296 139.355
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
Select financial information for Beta Corp. for the fiscal years ending December 20X4 and 20X5 is as follows:
please find the attached image 1 and 2
Additional information:
Shareholders’ equity for 20X3 was 48,138.
Which of the following statements regarding Beta Corp.’s profitability is true? Calculate gross margin and ROE for your analysis.
a) Beta’s gross margin has improved from the prior year, but it is weaker than the industry average. ROE has improved from the prior year, but it is weaker than the industry average.
b) Beta’s gross margin has improved from the prior year and is stronger than the industry average. ROE has improved from the prior year, but it is weaker than the industry average.
c) Beta’s gross margin has weakened from the prior year and is weaker than the industry average. ROE has weakened from the prior year, and it is weaker than the industry average.
d) Beta’s gross margin has weakened from the prior year and is weaker than the industry average. ROE has weakened from the prior year, but it is stronger than the industry average.
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