Topic

 4  -­‐  Chapter  14  Assignment  

1. Which  of  the  following  is  not  a  measure  of  profitability?  
 
a.   Asset  turnover  
b.   Current  ratio  
c.   Rate  of  return  on  shareholders’  equity  
d.   Earnings  per  common  share  
 
 
2. Information  relating  to  Urbandale  Company’s  per  share  common  stock  is  as  follows:  
 
  Per  share  
Book  value  at  December  31,  20X2   $    15.00  
Quoted  market  value  on  NY  Stock  Exchange  on  December  31,  20X2   10.00  
Earnings  for  20X2   5.00  
Par  value   2.00  
Dividend  for  20X2   1.00  
 
  What  is  the  price-­‐earnings  ratio  on  common  stock  for  20X2?  
 
a.   1.5  
b.   2.0  
c.   3.0  
d.   5.0  
 
3. The  following  information  was  taken  from  St.  Edmond  Corporation’s  financial  
statements:  
 
                                                     Liabilities  and  Stockholders’  Equity      
 
Current  Liabilities   $      30,000  
Long-­‐term  Liabilities   70,000  
Stockholders’  Equity        100,000  
Total  Liabilities  and  Stockholders’  Equity   $200,000  
Sales   $120,000  
Cost  of  Goods  Sold          50,000  
Gross  Margin   70,000  
Operating  Expenses          30,000  
Net  Income   $    40,000  
 
What  is  the  return  on  assets  for  St.  Edmond?  
 
a.   20%  
b.   33%  
c.   40%  
d.   Not  enough  information  provided  

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4. See  question  3.  What  is  the  return  on  sales  for  St.  Edmond  Corporation?  
 
a.   25%  
b.   33.3%  
c.   40%  
d.   Not  enough  information  provided  
 
5. Andrew,  Inc.,  began  20X2  with  100,000  shares  of  common  stock  outstanding.    On  April  
1,  20X2,  they  issued  an  additional  40,000  shares.    On  July  1,  20X2,  they  purchased  
10,000  shares  of  treasury  stock.    What  is  Andrew’s  weighted-­‐average  number  of  shares  
to  be  used  in  the  EPS  calculation?  
 
a.   125,000  
b.   130,000  
c.   140,000  
d.   150,000  
 
6. The  following  selected  amounts  were  extracted  from  financial  statements  of  the  Lakers  
Corporation:  

      Year  1   Year2   Year3  

    Sales   $200,000   280,000   250,000  

    Cost  of  Goods  Sold   100,000   150,000   140,000  

    Gross  Margin   100,000   130,000   110,000  

Required:  For  each  of  the  above  (round  answer  to  nearest  tenth  of  one  percent)  

A. Compute  the  percentage  change  from  year  1  to  year  2.  

B. Compute  the  percentage  change  from  year  2  to  year  3.  
 
7. Examine  the  following  income  statement  and  develop  a  common-­‐size  statement  by  
filling  in  the  blanks  provided:  

  20X2     20X2    

Sales     $500,000      

Cost  of  Goods  Sold        150,000      

Gross  Margin     350,000      

Operating  Expenses            140,000      

Income  before  Income  Tax     210,000      

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 Income  Tax  Expense          100,000      

Net  Income     $    110,000      

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