Chapter 2: 5DQ (page 46)
How is the income statement related to the balance sheet?
Income statement and balance sheet of a company are directly related to each other
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The Holtzman Corporation has assets of \(400,000, current liabilities of \)50,000, and long-term liabilities of \(100,000. There is \)40,000 in preferred stock outstanding; 20,000 shares of common stock have been issued.
a. Compute book value (net worth) per share.
b. If there is $22,000 in earnings available to common stockholders and
Holtzman’s stock has a P/E of 18 times earnings per share, what is the current
price of the stock?
c. What is the ratio of market value per share to book value per share?
Classify the following balance sheet items as current or noncurrent:
Retained earning | Bond payable |
Accounts payable | Accrued wages payable |
Prepaid expenses | Accounts receivable |
Plant and equipment | Capital in excess of par |
Inventory | Preferred stock |
Common stock | Marketable security |
If the accounts receivable turnover ratio is decreasing, what will be happening to the average collection period?
Elizabeth Tailors Inc. has assets of $8,940,000 and turns over its assets 1.9 times per year. Return on assets is 13.5 percent. What is the firm’s profit margin (returns on sales)?
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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