Re: [ vuZs.net ] FIN 630 & CS507

        

 

Solution of Question no.1:-

 

Acid Test Ratio = Current assets-Inventories-prepaid expense / Current Liabilities

       = (200,000 + 937,000 – 212,000) / 409,000 = 2.262

       =2.26 Times 

 

 

Net Profit Margin = (Net Profit after Taxation / Net Sales)*100

            = (30940000/105000000)*100

            =29.47%

 

Times Interest Earned =EBIT / interest Expense

       =50, 150000/ 2, 550000

       =19.67 Times

 

Earning per Share= (Net income – Dividends on preferred stock) / average outstanding shares

 =30940000-1230000/2000000

            =14.85

 Intrinsic value of stock = D1/ (r-g)

         = 5.30/ (12-0)

        = 5.30/ (12%)

        = 44.16

 

Solution of Question no.2:-

 

Ratios	Industry Average	Company's ratio	Ranking (Poor/good)
Quick	1.75 Times	2.26 Times	Good
Net Profit Margin	35%	29.47%	Poor
Interest Coverage	16 Times	19.67 Times	Good
Earning per share	Rs. 1.35	Rs.14.85	Good

 

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