## Forum Replies Created

Viewing 4 posts - 41 through 44 (of 44 total)
• Author
Posts
• in reply to: Price Elasticity of demand #15679

Answer: (C) the ease with which resources can be shifted to and from the production of this commodity to other uses.

in reply to: Price Elasticity of demand #15678

Answer: (A) less than unity. In case of inelastic demand, revenue and price move in the same direction.

in reply to: calculate the depreciation expense #15653

Solution

Income Statement

Sales 29,000
COGS 13,000
Depreciation
EBIT 3,753.85
Interest Expense 1,600
EBT 2,153.85
Taxes 753.85
Net income 1,400
Dividend Paid 900
Transfer to RE 500

EBT=Net Income/(1-Tax rate)
EBT=1,400/0.65
EBT=2,153.85

Tax Rate=2,153.85*0.35
Tax Rate= 753.85

EBIT=Interest Expense +EBT
EBIT= 1,600+2,153.85
EBIT=3,753.85

Depreciation =Sale-COGS-EBIT
Depreciation=29,000-13,000-3,753.85
Depreciation=12,246.15

in reply to: Need help with calculate financial ratio #15651

SOLUTION:

Return on Equity = ROE =25%
=Net income ÷ shareholders’ equity,
where Shareholder’s equity = Net income/ROE = \$2,500/0.25 = \$10,000

Net Profit Margin = NPM=5%
=Net income / sales revenue ,
where Net income=sales revenue*NPM = \$50,000*0.05 = \$2,500

Total Asset Turnover = TA T = Net sales/ Average Total Assets
Where, Net sales=\$50,000
Average Total Assets=Net Sales / TAT = \$50,000 / 2 = \$25,000

Inventory = \$4,000
Accounts Receivables = \$2,500
Sales = \$50,000,
Current Liabilities = \$5,000

Net Working Capital = NWC = \$2,000 = Current Assets – Current Liabilities,
Where Current Assets= Net Working Capital + Current Liabilities = \$2,000+\$5,000 = \$ 7,000

Total Assets = Average Total Assets*2 = \$25,000 * 2 = \$50,000

All sales are on credit.
Assume no prepaid expenses.
Assume 365 days

Compute the following:

Debt ratio
= Total Liabilities/ Total Assets = \$40,000/\$50,000 = 0.8 or 80%

Where,
Total liabilities = Total Assets – shareholder’s equity = \$50,000 – \$10,000 = \$40,000

Debt/equity ratio = Total Liabilities / Shareholders’ Equity = \$40,000/\$10,000 = 4

Equity multiplier = Total Assets/ Total Stockholder Equity = \$50,000/\$10,000 = 5

Total assets

Total Assets = Average Total Assets*2 = \$25,000 * 2 = \$50,000

Total debt =
Total liabilities = Total Assets – shareholder’s equity = \$50,000 – \$10,000 = \$40,000

Long term debt = Total Debt – Short term debt = \$40,000 – \$5,000 = \$35,000

• If total assets comprise of CA and Fixed Assets, compute Fixed Assets

Fixed Assets = Total Assets – Current Assets = \$50,000 – \$7,000 = \$43,000

Current Ratio = Current Assets / Current Liabilities = \$7,000/\$5,000= 1.4

Quick Ratio = (Current Assets- Inventory) / Current Liabilities
= (\$7,000-\$4,000)/ \$5,000 = 0.6

Accounts Receivable Turnover, Average Collection Period

Accounts Receivable Turnover= Net Credit Sales/ Average Accounts Receivable
= \$50,000/ \$2,500 = 20

Average Collection Period= 365 / Receivables Turnover = 365/20 = 18.25 days

Return on Assets = ROA = Net income/ Total Assets = \$2,500/\$50,000 = 0.05
Return on Assets= 5%

Viewing 4 posts - 41 through 44 (of 44 total)