Ratios are mostly calculated based on the financial statements of a firm. However, another group of ratios, called market-based ratios, relate to a firm's observable market value, stock prices, and book values, integrating information from both the market and firm's financial statements. Consider the case of Taggart Goods Corp.: Taggart Goods Corp. just reported a net income of $9,750,000, and its current stock price is $20.25 per share. Taggart Goods Corp. is forecasting an increase of 25% for its net income next year, but it also expects it will have to issue 2,900,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,400,000). If Taggart Goods Corp.'s forecast turns out to be correct and its price-to-earnings (P/E) ratio does not change, what does Taggart Goods Corp. expect its stock price to be one year from now? - $16.59 - $20.25 - $12.44 - $20.74 One year later, Taggart Goods Corp.'s stock is trading at $23.39, and the company reports its common equity value as $27,871,200. Taggart Goods Corp.'s market-to- book (M/B) ratio is

Ratios are mostly calculated based on the financial statements of a firm. However, another group of ratios, called market-based ratios, relate to a firm's observable market value, stock prices, and book values, integrating information from both the market and firm's financial statements. Consider the case of Taggart Goods Corp.: Taggart Goods Corp. just reported a net income of $9,750,000, and its current stock price is $20.25 per share. Taggart Goods Corp. is forecasting an increase of 25% for its net income next year, but it also expects it will have to issue 2,900,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,400,000). If Taggart Goods Corp.'s forecast turns out to be correct and its price-to-earnings (P/E) ratio does not change, what does Taggart Goods Corp. expect its stock price to be one year from now? - $16.59 - $20.25 - $12.44 - $20.74 One year later, Taggart Goods Corp.'s stock is trading at $23.39, and the company reports its common equity value as $27,871,200. Taggart Goods Corp.'s market-to- book (M/B) ratio is

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter12: Corporations: Organization, Stock Transactions, And Dividends

Section: Chapter Questions

Problem 2MAD: Analyze and compare Bank of America and Wells Fargo Bank of America Corporation (BAC) and Wells...

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Analyze and compare Bank of America and Wells Fargo Bank of America Corporation (BAC) and Wells Fargo Company (WFC) are two large financial services companies. The following data (in millions) were taken from a recent years financial statements for both companies: a. Compute the earnings per share for both companies. Round to the nearest cent. a. Which company appears to be more profitable on an earnings-per-share basis? b. Which company would you expect to have the larger quoted market price?
Measures of liquidity, solvency, and profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was 82.60 on December 31, 20Y2. Instructions Determine the following measures for 20Y2, rounding to one decimal place, including percentages, except for per-share amounts: 1. Working capital 2. Current ratio 3. Quick ratio 4. Accounts receivable turnover 5. Number of days sales in receivables 6. Inventory turnover 7. Number of days sales in inventory 8. Ratio of fixed assets to long-term liabilities 9. Ratio of liabilities to stockholders equity 10. Times interest earned 11. Asset turnover 12. Return on total assets 13. Return on stockholders equity 14. Return on common stockholders equity 15. Earnings per share on common stock 16. Price-earnings ratio 17. Dividends per share of common stock 18. Dividend yield
Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market value ratios, relate to a firm’s observable market value, stock prices, and book values, integrating information from both the market and the firm’s financial statements. Consider the case of Cold Goose Metal Works Inc.: Cold Goose Metal Works Inc. just reported earnings after tax (also called net income) of $8,000,000 and a current stock price of $14.75 per share. The company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 1,500,000 new shares of stock (raising its shares outstanding from 5,500,000 to 7,000,000). If Cold Goose’s forecast turns out to be correct and its price/earnings (P/E) ratio does not change, what does the company’s management expect its stock price to be one year from now? (Round any P/E ratio calculation to four decimal places.) $14.55 per share…
Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market value ratios, relate to a firm's observable market value, stock prices, and book values, integrating information from both the market and the firm's financial statements. Consider the case of Cute Camel Woodcraft Company: Cute Camel Woodcraft Company just reported earnings after tax (also called net income) of $9,000,000 and a current stock price of $20.25 per share. The company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 2,500,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,000,000). If Cute Camel's forecast turns out to be correct and its price/earnings (P/E) ratio does not change, what does the company's management expect its stock price to be one year from now? (Round any P/E ratio calculation to four decimal places.) O $17.41 per share $20.25 per share…
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Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance of a firm. Your boss has asked you to calculate the profitability ratios of Diusitech Inc. and make comments on its second-year performance as compared with its first-year performance. The following shows Diusitech Inc.'s income statement for the last two years. The company had assets of $8,225 million in the first year and $13,157 million in the second year. Common equity was equal to $4,375 million in the first year, and the company distributed 100% of its earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year. Diusitech Inc. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 4,445 1,120 222 1,342 3,103 310 2,793 698 2,095 Net Sales Operating costs except depreciation and amortization Depreciation and…
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Requirement 1. Compute the following ratios for both companies for the current year, and decide which company’s stock better fits your investment strategy. a. Acid-test ratio b. Inventory turnover c. Days’ sales in receivables d. Debt ratio e. Earnings per share of common stock f. Price/earnings ratio g. Dividend payout
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