ACCG70011

Finance and Managerial Accounting

Assignment #1

Chapter 14

Using the income statement, balance sheet, and extra information found below compute the following for year 2 only. Round all figures to 2 decimal points.

a. The Earnings per Share

b. The Dividend Yield Ratio

c. The Dividend Payout Ratio

d. The Price-Earnings Ratio

e. The Book Value per Common Share

f. The Gross Margin Percentage

g. The Return on Total Assets

h. The Return on Common Shareholders' Equity

i. The Working Capital

j. The Current Ratio

k. The Acid-Test Ratio

l. The Average Collection Period

m. Average Sales Period

n. The Times Interest Earned.

o. The Debt-to-Equity Ratio

Each ratio is worth 3 marks each, 45 marks in total.

Modern Building Supply sells various building materials to retail outlets. The company has just approached Linden Bank requesting a $300,000 loan to strengthen the cash account and to pay certain short term debt obligations.

The companies' financial statements for the most recent two years are below:

Modern Building Supply

Comparative Balance Sheet

Additional Info:

• there has been no change in the preferred or common shares outstanding over the last three years
• The company's common shares are currently selling for $45 per share. Last year, the shares sold for $30 per share. (market value)
• Total Shareholders' equity was $2,000,000 on January 1 of last year
• All sales are on account
• At the beginning of last year, the accounts receivable balance was $350,000 and inventory balance was $450,000.

Modern Building Supply

Comparative Income Statements & Reconciliation of Retained Earnings

Make sure to show ALL work! A majority of the marks are based on the work, not the final answer. To receive full credit for each question, you must show your work, round your final answers to 2 decimal points correctly, and put the appropriate 'label' at the end of each figure (as shown below).

Assignment 1 is due October 5 11:59PM - Noon as a Microsoft Word or Excel file in the drop box located on SLATE only. Late assignments are subject to a 10% per day penalty.

Chapter 14 Labels - please note, these are not the answers, but how the answers need to be presented.

Return on Total Assets = 10.92 %

Return on Common Shareholder's Equity = 7.54%

Gross Margin Percentage = 38.63%

Earnings Per Share = $5.32 per share

Fully Diluted Earnings per Share = $5.85 per share

Price Earnings Ratio = 20 times

Dividend Payout Ratio = 20%

Dividend Yield = 20 %

Working Capital = $23 000

Current Ratio = $9 to $1

Acid Test = $2.13 to $1

Accounts Receivable Turnover = 2.57 times

Average Collection Period = 34 days

Inventory Turnover = 3.49 times

Average Sales Period = 49 days

Times Interest Earned Ratio = 3 times

Debt to Equity Ratio = $0.3 to $1

Book Value per Share = $5 per Share