Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Help calculating the following ratios:
return on equity - current ratio
- quick ratio
- debt-to-equity
- times interest earned
Transcribed Image Text:INCOME STATEMENT
2020
revenues (all A/R)
1000
COGS
400
gross profit
600
operating expenses
200
EBIT
400
interest expense
200
EBT
200
tax expense
100
net income
100
STATEMENT of RE
beginning retained eamings
450
net income
100
dividends
50
ending retained earnings
500
cash
200
A/R
100
inventory
200
current assets
500
long-term assets
2500
total assets
3000
BALANCE SHEET
current liabilities
200
long-term liab
1800
total liabilities
2000
common stock
500
retained earnings
500
1000
common equity
total liabilities & 0/E
3000
Expert Solution
Step 1 Using the following formulas
ROE = Earning available to Equity shareholders * 100/ Equity shareholders fund
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets – Inventories – Prepaids)/ Current Liabilities
Debt to Equity = Debt / Equity
Times Interest Earned = EBITDA / Interest Expenses
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