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$1)$ Blanton Corporation increased its financial leverage during $2010$ by taking out a loan and using the proceeds to buy back common stock. At the end of $2010,$ the corporation reported higher earnings per share and higher return on equity. However, its stock price declined.

Discuss why this may happen.

$2)$ Please refer to the table below for the following question.

Financial Data for Springfield Power Co$.$ as of December $31,2010$:

Inventory $$300,000$

Long$-$term debt $500,000$

Interest expense $25,000$

Accumulated depreciation $450,000$

Cash $280,000$

Net sales $($all credit$)1,800,000$

Common stock $900,000$

Accounts receivable $325,000$

Operating expense $($incl$.$ depr. exp. and taxes$)625,000$

Notes payable$-$current $200,000$

Cost of goods sold $1,100,000$

Plant and equipment $1,400,000$

Accounts payable $180,000$

Marketable securities $80,000$

Accrued wages $45,000$

Retained earnings $190,000$

From the information presented in Table $4-6,$ calculate the following ratios for the Springfield Power Co$.$

i$.$ current ratio

ii$.$ acid test ratio

iii. average collection period

iv$.$ inventory turnover

v$.$ gross profit margin

vi$.$ operating profit margin

vii. net profit margin

viii. total asset turnover

$3)$ Please refer to the table below for the following question.

Hokie Corporation Comparative Balance Sheet

For the Years Ending December $31,2009$ and $2010$

$($Millions of Dollars$)$

Assets $20092010$

Current Assets:

Cash $$2$ $$10$

Accounts receivable $1612$

Inventory $2226$

Total current assets $$40$ $$48$

Gross fixed assets: $$120$ $$124$

Less accumulated depreciation $(60)(64)$

Net fixed assets $6060$

Total assets $$100$ $$108$

Liabilities and owners' equity:

Current liabilities:

Accounts payable $$16$ $$18$

Notes payable $1010$

Total current liabilities $$26$ $$28$

Long$-$term debt $2018$

Owners' equity:

Common stock $4040$

Retained earnings $1422$

Total liabilities and owners' equity $$100$ $$108$

Hokie had net income of $$28$ million for $2010$ and paid total cash dividends of $$20$ million to their common stockholders.

Calculate the following $2010$ financial ratios of Aggie Corporation using the information given in Table $4-7$:

i$.$ current ratio

ii$.$ acid test ratio

iii. debt ratio

iv$.$ return on total assets

v$.$ return on common equity

$$

$4)$ Beverly Corp. had total sales of $$1,200,000$ in $2010(80$ percent of its sales are credit$).$ The company's gross profit margin is $25$ percent, its ending inventory is $$150,000,$ and its accounts receivable balance is $$90,000.$ What additional amount of cash could the firm have generated if it had increased its inventory turnover ratio to $9\mathrm{.}0$ and reduced its average collection period to $28\mathrm{.}21875$ days?

$5)$ Complete the following balance sheet using the information given. Round account balances to the nearest dollar.

Balance Sheet Income Statement

Cash Sales $($All Credit$)$ $$20,000$

Accounts receivable Cost of goods sold $10,000$

Inventory Operating expenses $6,000$

Net fixed assets Interest expense $100$

Total assets Taxes $1,365$

Net income $$2,535$

Accounts payable

Short$-$term notes payable $$1,425$ Ratios:

Long$-$term debt Profit Margin $=12\mathrm{.}675\%$

Common stock $$5,000$ Return on Equity $=15\%$

Retained earnings Quick Ratio $=1\mathrm{.}2$

Total Liabilities and equity Return on Total Assets $=10\%$

Fixed Asset Turnover $=1\mathrm{.}6$

Current Ratio $=2$

Days Sales Outstanding $=45$

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