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.

Broward Manufacturing recently reported the following information: $$ \begin{matrix} \text{Net income} & \text{\$ 615.000}\\ \text{ROA} & \text{10\\%}\\ \text{Interest expense} & \text{\$ 202.950}\\ \text{Accounts payable and accruals} & \text{\$ 950.000}\\ \end{matrix} $$ Broward’s tax rate is 30%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC).

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?

Baker Industries’s net income is $24,000, its interest expense is$5,000, and its tax rate is 40%. Its notes payable equals $27,000, long-term debt equals$75,000, and common equity equals $250,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm’s ROE and ROIC?

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 Brauer Corp.:

$$\begin{array}{ll}\text { Sales/Total assets } & 1.5 \times \\ \text { Return on assets (ROA) } & 3.0 \% \\ \text { Return on equity (ROE) } & 5.0 \%\end{array}$$

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

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?

A firm has been experiencing low profitability in recent years. Perform an analysis of the firm’s financial position using the DuPont equation. The firm has no lease payments but has a $2 million sinking fund payment on its debt. The most recent industry average ratios and the firm’s financial statements are as follows:$ $$ \begin{matrix} \text{Industry Average Ratios}\\ \text{Current ratio} & \text{3 }{\times} & \text{Fixed assets turnover} & \text{6 }{\times}\\ \text{Debt-to-capital ratio} & \text{20\\%} & \text{Total assets turnover} & \text{3 }{\3 times}\\ \text{Times interest earned} & \text{7 }{\times} & \text{Profit margin} & \text{3\\%}\\ \text{EBITDA coverage} & \text{9 }{\times} & \text{Return on total assets} & \text{9\\%}\\ \text{Inventory turnover} & \text{10}{\times} & \text{Return on common equity} & \text{12.86\\%}\\ \text{Days sales outstanding} & \text{24 days} & \text{Return on invested capital} & \text{11.50\\%}\\ \end{matrix} $$ $$ $\begin{matrix} \text{Balance Sheet as of December 31, 2016 (millions of Dollars)}\\ \text{Cash and equivalents} & \text{\$ 78} & \text{Accounts payable} & \text{\$ 45}\\ \text{Accounts receivable} & \text{66} & \text{Other current liabilities} & \text{11}\\ \text{Inventories} & \text{159} & \text{Notes payable} & \text{29}\\ \text{Total current assets} & \text{\$ 303} & \text{Total current liabilities} & \text{\$ 85}\\ \text{ } & \text{ } & \text{Long-term debt} & \text{50}\\ \text{ } & \text{ } & \text{Total liabilities} & \text{\$ 135}\\ \text{Gross fixed assets} & \text{225} & \text{Common stock} & \text{114}\\ \text{Less depreciation} & \text{78} & \text{Retained earnings} & \text{201}\\ \text{Net fixed assets} & \text{\$ 147} & \text{Total stockholders' equity} & \text{\$ 315}\\ \text{Total assets} & \text{\$ 450} & \text{Total liabilities and equity} & \text{\$ 450}\\ \end{matrix} $$ $$ \begin{matrix} \text{Income Statements for Year Ended December 31, 2016 (millions of dollars)}\\ \text{Net sales} & \text{\$ 795.0}\\ \text{Cost of goods sold} & \text{660.0}\\ \text{Gross profit} & \text{\$ 135.0}\\ \text{Selling expenses} & \text{73.5}\\ \text{EBITDA} & \text{\$ 61.5}\\ \text{Depreciation expense} & \text{12.0}\\ \text{Earnings before interest and taxes (EBIT)} & \text{\$ 49.5}\\ \text{Interest expense} & \text{4.5}\\ \text{Earnings before taxes (EBT)} & \text{\$ 45.0}\\ \text{Taxes (40\\%)} & \text{18.0}\\ \text{Net income} & \text{\$ 27.0}\\ \end{matrix} $$ a. Calculate the ratios you think would be useful in this analysis. b. Construct a DuPont equation, and compare the company’s ratios to the industry average ratios. c. Do the balance sheet accounts or the income statement figures seem to be primarily responsible for the low profits? d. Which specific accounts seem to be most out of line relative to other firms in the industry? e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how might that affect the validity of your ratio analysis? How might you correct for such potential problems?

A firm has a profit margin of 3% and an equity multiplier of 1.9. Its sales are $150 million, and it has total assets of$60 million. What is its ROE?

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.

Lloyd Inc. has sales of $200,000, a net income of$15,000, and the following balance sheet:

$$\begin{matrix} \text{Cast} & \text{\$ 10.000} & \text{Accounts payable} & \text{\$ 30.000}\\ \text{Receivables} & \text{50.000} & \text{Notes payable to bank} & \text{20.000}\\ \text{Inventories} & \text{150.000} & \text{Total current liabilities} & \text{\$ 50.000}\\ \text{Total current assets} & \text{\$ 210.000} & \text{Long-term debt} & \text{50.000}\\ \text{Net fixed assets} & \text{90.000} & \text{Common equity} & \text{200.000}\\ \text{Total assets} & \text{\$ 300.000} & \text{Total liabilities and equity} & \text{\$ 300.000}\\ \end{matrix}$$

The new owner thinks that inventories are excessive and can be lowered to the point where the current ratio is equal to the industry average, 2.5 $\times$, without affecting sales or net income. If inventories are sold and not replaced (thus reducing the current ratio to 2.5$\times$); if the funds generated are used to reduce common equity (stock can be repurchased at book value); and if no	other changes occur,by how much will the ROE change? What will be the firm’s new quick ratio?

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?

Data for Barry Computer Co. and its industry averages follow. a. Calculate the indicated ratios for Barry. b. Construct the DuPont equation for both Barry and the industry. c. Outline Barry’s strengths and weaknesses as revealed by your analysis. d. Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2016. How would that information affect the validity of your ratio analysis?

$$\begin{matrix} \text{Barry Computer Company:} & \text{Balance Sheet as of December 31, 2016 (in Thousands)}\\ \text{Cash} & \text{\$ 77.500} & \text{Accounts payable} & \text{\$ 129.000}\\ \text{Receivables} & \text{336.000} & \text{Other current liabilities} & \text{117.000}\\ \text{Inventories} & \text{241.500} & \text{Notes payable to bank} & \text{84.000}\\ \text{Total current assets} & \text{\$ 655.000} & \text{Total current liabilities} & \text{\$ 330.000}\\ \text{ } & \text{ } & \text{Long-term debt} & \text{256.500}\\ \text{Net fixed assets} & \text{292.500} & \text{Common equity} & \text{361.000}\\ \text{Total assets} & \text{\$ 947.500} & \text{Total liabilities and equity} & \text{\$ 947.500}\\ \end{matrix}$$

$$\begin{matrix} \text{Barry Computer Company:} & \text{Balance Sheet as of December 31, 2016 (in Thousands)}\\ \text{Sales} & \text{ } & \text{\$ 1.607.500}\\ \text{Costs of goods sold} & \text{ }\\ \text{Materials} & \text{\$ 717.000}\\ \text{Labor} & \text{453.000}\\ \text{Heat, light, and power} & \text{68.000}\\ \text{Indirect labor} & \text{113.000}\\ \text{Deprecation} & \text{41.500} & \text{1.392.500}\\ \text{Gross profit} & \text{ } & \text{\$ 215.000}\\ \text{Selling expenses} & \text{ } & \text{115.000}\\ \text{General and administrative expenses} & \text{ } & \text{30.000}\\ \text{Earnings before interest and taxes (EBIT)} & \text{ } & \text{\$ 70.000}\\ \text{Interest expense} & \text{ } & \text{24.500}\\ \text{Earnings before taxes (EBT)} & \text{ } & \text{\$45.500}\\ \text{Federal and state income taxes (40\\\%)} & \text{ } & \text{18.200}\\ \text{Net income} & \text{ } & \text{\$ 27.300}\\ \end{matrix}$$

$$\begin{matrix} \text{Ratio} & \text{Barry} & \text{Industry Average}\\ \text{Current} & \text{ } & \text{2.0 }{\times}\\ \text{Quick} & \text{ } & \text{1.3 }{\times}\\ \text{Days sales outstanding} & \text{ } & \text{35 days}\\ \text{Inventory turnover} & \text{ } & \text{6.7 }{\times}\\ \text{Total assets turnover} & \text{ } & \text{3.0 }{\times}\\ \text{Profit margin} & \text{ } & \text{1.2\\\%}\\ \text{ROA} & \text{ } & \text{3.6\\\%}\\ \text{ROE} & \text{ } & \text{9.0\\\%}\\ \text{ROIC} & \text{ } & \text{7.5\\\%}\\ \text{TIE} & \text{ } & \text{3.0 }{\times}\\ \text{Debt/Total capital} & \text{ } & \text{47.0\\\%}\\ \end{matrix}$$

Assume you are given the following relationships for the Haslam Corporation:

Sales/total assets 1.2

Return on assets (ROA) 4%

Return on equity (ROE) 7%

Calculate Haslam’s profit margin and liabilities-to-assets ratio. Suppose half its liabilities are in the form of debt. Calculate the debt-to-assets ratio.