Question

Net cash from operating activities $46,050 $38,000 $32,000 $16,050 shares outstanding 33,000 30,000 Compute these values and ratios for 2016 and 2017. (Round Earnings per share to 2 decimal places, a.g. $2.78 and Current Ratie and Debt to assets ratio to 1 decimal place, e.g. 1.515

Answer 1

Answer :

	2016	2017
(a). Earnings per share	$ 2.70	$ 2.49
(b). Working Capital	$ 114,000	$ 142,000
(c). Current Ratio	2.6 : 1	2.9 : 1
(d). Debt to Assets ratio	24.1 %	21.2 %
(e). Free cash flow	$ 3,000	$ 19,900

Working Notes :

(a). Earnings per share =

(Net Income - Preference shares dividend ) ÷ Weighted average shares outstanding

2016 = ( 81,000 - 0) ÷ 30,000 = $ 2.70

2017 = ( 82,000 - 0) ÷ 33,000 = $ 2.49

(b). Working Capital =

Current Assets - Current Liabilities

(Cash + Receivables+ Other current assets) - Current Liabilities

2016 = (21,050 + 76,500 + 87,500) - 71,050 = $ 114,000

2017 = (29,050 + 84,500 +104,500)- 76,050 = $ 142,000

(c). Current Ratio =

Current Assets ÷ Current Liabilities

2016 = 185,050 ÷ 71,050 = 2.6 : 1

2017 = 218,050 ÷ 76,050 = 2.9 : 1

(d). Debt to Assets ratio =

Total Liabilities ÷ Total Assets

2016 = [(71,050 + 104,500) ÷ 729,550] × 100 = 24.1 %

2017 = [(76,050 + 94,500) ÷ 804,550] × 100 = 21.2 %

(e). Free Cash Flow =

Cash flow from operating activities - Capital expenditure - Cash dividend paid

2016 = 57,050 - 38,000 - 16,050 = $ 3,000

2017 = 97,950 - 46,050 - 32,000 = $ 19,900