Precious MetalMining has $17 million in sales, its ROE is 17$\times$. Common equity on the firm’s balance sheet is 50% of its total assets. What is its net income?

Compare the performance of S&S Air to the industry. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How do you think S&S Air’s ratio would compare to the industry average?

S&S AIR, INC. $2018$ Income Statement
Sales	$\$46,298,115$
Cost of goods sold	$34,536,913$
	$5,870,865$
Depreciation	$2,074,853$
Earnings before interest and taxes	$\$3,815,484$
Interest paid	$725,098$
Taxable income	$3,090,386$
Taxes ($25\%$)	$772,597$
Net income	$2,317,789$
Dividends	$\$705,000$
Retained earnings	$1,612,789$

S&S AIR, INC. $2018$ Balance Sheet
Current assets		Current liabilities
Cash	$\$524,963$	Accounts payable	$\$1,068,356$
Accounts receivable	$843,094$	Notes payable	$2,439,553$
Inventory	$1,235,161$	Total current liabilities	$3,507,909$
Total current assets	$\$2,603,218$	Long-term debt	$\$6,300,000$
Fixed assets
Net plant and equipment	$\$20,381,945$	Shareholder equity
		Common stock	$\$460,000$
		Retained earnings	$12,717,254$
		Total equity	$\$13,177,254$
Total assets	$\$22,985,163$	Total liabilities and equity	$\$22,985,163$

Light Airplane Industry Ratios
	Lower Quartile	Median	Upper Quartile
Current ratio	$.50$	$1.43$	$1.89$
Quick ratio	$.21$	$.35$	$.62$
Cash ratio	$.08$	$.21$	$.39$
Total asset turnover	$.68$	$.85$	$1.38$
Inventory turnover	$4.89$	$6.15$	$10.89$
Receivables turnover	$6.27$	$9.82$	$14.11$
Total debt ratio	$.41$	$.52$	$.61$
Debt-equity ratio	$.68$	$1.08$	$1.56$
Equity multiplier	$1.68$	$2.08$	$2.56$
Times interest earned	$5.18$	$8.06$	$9.83$
Cash coverage ratio	$5.84$	$9.41$	$10.27$
Profit margin	$4.05\%$	$5.10\%$	$7.15\%$
Return on assets	$6.05\%$	$9.53\%$	$13.21\%$
Return on equity	$9.93\%$	$15.14\%$	$19.15\%$

A company has an EPS of $2.40, a book value per share of$21.84, and a market/book ratio of 2.7$\times$. What is its P/E ration?

Edelman Engines has $17 billion in total assets. Its balance sheet shows$1.7 billion in current liabilities, $10.2 billion in long-term debt, and$5.1 billion in common equity. It has 300 million shares of common stock outstanding, and its stock price is $20 per share. What is Edelman’s market/book ratio?

Henderson’s Hardware has an ROA of 11%, a 6% profit margin, and an ROE of 23%. What is its total assets turnover? What is its equity multiplier?

Assume the following relationships for the Caulder Corp.: $$ \begin{matrix} \text{Sales/Total assets} & \text{1.3 }{\times}\\ \text{Return on assets (ROA)} & \text{4.0\\%}\\ \text{Return on equity (ROE)} & \text{8.0\\%}\\ \end{matrix} $$ Calculate Caulder’s profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital.

Pacific Packaging’s ROE last year was only 5%; but its management has developed a new operating plan that calls for a debt-to-capital ratio of 40%, which will result in annual interest charges of $561,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of$1,258,000 on sales of $17,000,000, and it expects to have a total assets turnover ratio of 2.1. Under these conditions, the tax rate will be 35%. If the changes are made, what will be the company’s return on equity?

Byron Books Inc. recently reported $13 million of net income. Its EBIT was$20.8 million, and its tax rate was 35%. What was its interest expense? (Hint: Write out the headings for an income statement, and fill in the known values. Then divide $13 million of net income by (1-T)=0.65 to find the pretax income. The difference between EBIT and taxable income must be interest expense. Use this same procedure to complete similar problems.)

Assume the following relationships for the Caulder Corp.:

$$\begin{array}{ll} \text { Sales/Total assets } & 1.3 \times \\ \text { Return on assets (ROA) } & 4.0 \text{ percent } \\ \text { Return on equity (ROE) } & 8.0 \text{ percent } \end{array}$$

Calculate Caulder’s profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital.

A proton $\left(^{1} \mathrm{H}\right)$ and a deuteron $(^{2} \mathrm{H},$ "heavy" hydrogen) start out far apart. An experimental apparatus shoots them toward each other (with equal and opposite momenta). If they get close enough to make actual contact with each other, they can react to form a helium-3 nucleus and a gamma ray (a high-energy photon, which has kinetic energy but zero rest energy): $^{1} \mathrm{H}+^{2} \mathrm{H} \rightarrow^{3} \mathrm{He}+\gamma$ This is one of the thermonuclear or fusion reactions that takes place inside a star such as our Sun. The mass of the proton is 1.0073 u (unified atomic mass unit, $1.7 \times 10^{-27} \mathrm{kg}$, the mass of the deuteron is 2.0136 u, the mass of the helium-3 nucleus is 3.0155 u, and the gamma ray is massless. In this problem you must keep at least six significant figures throughout your calculation. Problems involving mass changes require many significant figures because the changes in mass are small compared to the total mass. Kinetic energy can be used to drive motors and do other useful things. If a mole of hydrogen and a mole of deuterium underwent this fusion reaction, how much kinetic energy would be generated? (For comparison, around $1 \times 10^{6} \mathrm{J}$ are obtained from burning a mole of gasoline.)

Kaye’s Kitchenware has a market/book ratio equal to 1. Its stock price is $12 per share and it has 4.8 million shares outstanding. The firm’s total capital is$110 million and it finances with only debt and common equity. What is its debt-to-capital ratio?

Baxley Brothers has a DSO of 23 days, and its annual sales are $3,650,000. What is its accounts receivable balance? Assume that it uses a 365-day year.

Ebersoll Mining has $\$ 6$ million in sales, its ROE is $12 \%$, and its total assets turnover is $3.2 \times$. Common equity on the firm's balance sheet is $50 \%$ of its total assets. What is its net income?

The Stewart Company has $2,392,500 in current assets and$1,076,625 in current liabilities. Its initial inventory level is $526,350, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes payable) increase without pushing its current ratio below 2.0?