Financial Statement Questions 2Given the following probable states of the economy and the expected return on a security in each state:State of Economy Probability Return of Stock AReturn of Stock BRecession0.5020%18%Normal0.4045%35%Boom0.2030%40%i.Compute the expected returns for Stock A and Stock B;ii.Compute the standard deviation for Stock A and Stock B;ii.Compute the coefficient of variation for Stock A and B; andiv.Which of the stocks do you consider to be of greater risk?Discuss your reasoning STRUCTUREDANSWERSQuestion 1Daniel, an investor is considering purchasing shares in either Garth Ltd & James Ltd. Bothcompanies are in the same line of business and their accounts are summarized below:Statement of financial Position as at December 1* 2016AssetsGarth LtdJames Ltd.S'000840Non Current AssetsS'0000S'000S'000At Cost2 140Accumulated Depreciation(226)614(280)1 852Current AssetsInventory276334Receivables138196Bank and Cash192606185481 2202 400Equity and LiabilitiesCapital7401 8003401 080Retained Eamings1381938Non-Current Liabilities10% loan Note160Current LiabilitiesTrade payablesInterest payable1202402Income tax20140601 220302240income Statement ior tne year Endea JI Decemper 2010Garth Ltd.James Ltd.$'000$'000$'000S'0001 1921 356(1 052)Sales revenueCost of Sales(788)Gross Profit404304Expenses:Administrative7290Selling $ Dist.106112DepreciationLoan note interest2838(206)16(256)Net Profit19848a. Compute the following rati os:i.Accounts Receivable Turnover ratio;11.Accounts Payable Tumover ratio;Average CollectionPeriod;111.iv.Aver age Payable Period;Quick Ratio;V.Gross Profit MarginVi.Net Profit MarginDebt ratiob. Explain briefly what is factoring?

Given the following probable states of the economy and the expected return on a security in each state: State of Economy Probability Return of Stock A Return of Stock B Recession 0.50 20% 18% Normal 0.40 45% 35% Boom 0.20 30% 40% i. Compute the expected returns for Stock A and Stock B;

Given the following probable states of the economy and the expected return on a security in each state: State of Economy Probability Return of Stock A Return of Stock B Recession 0.50 20% 18% Normal 0.40 45% 35% Boom 0.20 30% 40% i. Compute the expected returns for Stock A and Stock B;

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter2: Asset And Liability Valuation And Income Recognition

Section: Chapter Questions

Problem 21PC

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