Quantitative Problem: Rosnan Industries' 2014and 2013 balance sheets and income statements are shown below.
| BalanceSheets: |
| 2014 | 2013 |
| Cash and equivalents | $70Â Â | $55Â Â |
| Accounts receivable | 275Â Â | 300Â Â |
| Inventories | 375Â Â | 350Â Â |
| Â Â Â Â Â Â Total current assets | $720Â Â | $705Â Â |
| Net plant and equipment | 2,000Â Â | 1,490Â Â |
| Total assets | $2,720Â Â | $2,195Â Â |
| | |
| Accounts payable | $150Â Â | $85Â Â |
| Accruals | 75Â Â | 50Â Â |
| Notes payable | 120Â Â | 145Â Â |
| Â Â Â Â Â Â Total current liabilities | $345Â Â | $280Â Â |
| Long-term debt | 450Â Â | 290Â Â |
| Common stock | 1,225Â Â | 1,225Â Â |
| Retained earnings | 700Â Â | 400Â Â |
| Total liabilities and equity | $2,720Â Â | $2,195Â Â |
| IncomeStatements: |
| 2014 | 2013 |
| Sales | $2,000Â Â | $1,500Â Â |
| Operating costs excludingdepreciation | 1,250Â Â | 1,000Â Â |
| EBITDA | $750Â Â | $500Â Â |
| Depreciation and amortization | 100Â Â | 75Â Â |
| EBIT | $650Â Â | $425Â Â |
| Interest | 62Â Â | 45Â Â |
| EBT | $588Â Â | $380Â Â |
| Taxes (40%) | 235Â Â | 152Â Â |
| Net income | $353Â Â | $228Â Â |
| | |
| Dividends paid | $53Â Â | $48Â Â |
| Addition to retained earnings | $300Â Â | $180Â Â |
| | |
| Shares outstanding | 100Â Â | 100Â Â |
| Price | $25.00Â Â | $22.50Â Â |
| WACC | 10.00%Â Â | Â Â |
What is the firm’s 2014 current ratio? Round your answer to twodecimal places.
The 2014 current ratio indicates that Rosnan hassufficient/insufficient current assets to meet its currentobligations as they come due.
What is the firm’s 2014 total assets turnover ratio? Round youranswer to four decimal places.
Given the 2014 current and total assets turnover ratioscalculated above, if Rosnan’s 2014 quick ratio is 1.0 then ananalyst might conclude that Rosnan’s fixed assets are managed-Select-efficiently/inefficiently
What is the firm’s 2014 debt-to-capital ratio? Round your answer totwo decimal places.
%
If the industry average debt-to-capital ratio is 30%, thenRosnan’s creditors have a -Select-smaller/bigger cushion thanindicated by the industry average.
What is the firm’s 2014 profit margin? Round your answer to twodecimal places.
%
If the industry average profit margin is 12%, then Rosnan’slower than average debt-to-capital ratio might be one reason forits high profit margin.
-Select-True/FalseCorrect
What is the firm’s 2014 price/earnings ratio? Round your answerto two decimal places.
Using the DuPont equation, what is the firm’s 2014 ROE? Roundyour answer to two decimal places.
%
