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Chapter 2: 5BP_a (page 146)
Eaton Tool Company has fixed costs of \(255,000, sells its units for \)66, and has variable costs of $36 per unit.
a. Compute the break-even point.
The break-even point of the company is 8,500 units.
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Frantic Fast Foods had earnings after taxes of $420,000 in 20X1 with 309,000 shares outstanding. On January 1, 20X2, the firm issued 20,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 30 percent.
a. Compute earnings per share for the year 20X1.
b. Compute earnings per share for the year 20X2.
The Haines Corp. shows the following financial data for 20X1 and 20X2:
20X1 | 20X2 | |
Sales | \(3,230,000 | \)3,370,000 |
Cost of goods sold | 2,130,000 | 2,850,000 |
Gross profits | \(1,100,000 | \)520,000 |
Selling and administrative expenses | 298,000 | 227,000 |
Operating profits | \(802,000 | \)293,000 |
Interest expense | 47,200 | 51,600 |
Income before taxes | \(754,800 | \)241,400 |
Taxes (35%) | 264,180 | 84,490 |
Income after tax | \(490,620 | \)156,910 |
For each year, compute the following and indicate whether it is increasing or
decreasing profitability in 20X2 as indicated by the ratio:
a. Cost of goods sold to sales.
The balance sheet for Stud Clothiers is shown below. Sales for the year were \(2,400,000, with 90 percent of sales sold on credit.
Stud Clothier | |||
Balance sheet 20X1 | |||
Assets | Liabilities and Equity | ||
Cash | \)60,000 | Account payable | \(220,000 |
Account receivable | 240,000 | Accrued taxes | 30,000 |
Inventory | 350,000 | Bonds payable (long term) | 150,000 |
Plant and equipment | 410,000 | Common stock | 80,000 |
Paid in capital | 200,000 | ||
Retained earnings | 380,000 | ||
Total assets | \)1,060,000 | Total LIbilities and Equity | $1,060,000 |
Compute the following:
a. Current ratio
a. Swank Clothiers had sales of \(383,000 and cost of goods sold of \)260,000. What is the gross profit margin (ratio of gross profit to sales)?
b. If the average firm in the clothing industry had a gross profit of 25 percent,
how is the firm doing?
Amigo Software Inc. has total assets of \(889,000, current liabilities of\)192,000, and long-term liabilities of \(154,000. There is \)87,000 in preferredstock outstanding. Thirty thousand shares of common stock have been issued.
a. Compute book value (net worth) per share.
b. If there is $56,300 in earnings available to common stockholders and the
firm’s stock has a P/E of 23 times earnings per share, what is the currentprice of the stock?
c. What is the ratio of market value per share to book value per share? (Round
to two places to the right of the decimal point.)
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