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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What are the three primary sections of the statement of cash flows? In what section would the payment of a cash dividend be shown?
Arrange the following items in proper balance sheet presentation:
Accumulated depreciation | \(309,000 |
Retained earnings | 187,000 |
Cash | 14,000 |
Bonds payable | 136,000 |
Accounts receivable | 54,000 |
Plant and equipment – original cost | 775,000 |
Accounts payable | 35,000 |
Allowance for bad debts | 9,000 |
Common stock, \)1 par, 100,000 share outstanding | 100,000 |
Inventory | 70,000 |
Preferred stock, $59 par, 1,000 share outstanding | 59,000 |
Marketable securities | 24,000 |
Investments | 20,000 |
Notes payable | 34,000 |
Capital paid in excess of par (common stock) | 88,000 |
Jerry Rice and Grain Stores has \(4,780,000 in yearly sales. The firm earns 4.5 percent on each dollar of sales and turns over its assets 2.7 times per year. It has \)123,000 in current liabilities and $349,000 in long-term liabilities.
a. What is its return on stockholders’ equity?
Using the income statement for Times Mirror and Glass Co., compute the following ratios:
The total assets for this company equal \(80,000. Set up the equation for the Du Pont system of ratio analysis, and compute c, d, and e.
e. Return on assets (investment).
Times mirror and glass company | |
Sales | \)126,000 |
Less: Cost of goods sold | 93,000 |
Gross profit | \(33,000 |
Less: selling and administrative expenses | 11,000 |
Lease Expenses | 4,000 |
Operating profit* | \)18,000 |
Less: Interest expenses | 3,000 |
Earning before taxes | \(15,000 |
Less: Taxes (30%) | 4,500 |
Earning after taxes | \)10,500 |
*equal income before interest and taxes
The Rogers Corporation has a gross profit of \(880,000 and \)360,000 in depreciation expense. The Evans Corporation also has \(880,000 in gross profit,
with \)60,000 in depreciation expense. Selling and administrative expense is $120,000 for each company. Given that the tax rate is 40 percent, compute the cash flow for both companies.
Explain the difference in cash flow between the two firms.
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