Question

Exhibit 4.1
The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $)
Assets		2016
Cash and securities		$2,145
Accounts receivable		8,970
Inventories		12,480
Total current assets		$23,595
Net plant and equipment		$15,405
Total assets		$39,000
Liabilities and Equity
Accounts payable		$7,410
Accruals		4,290
Notes payable		5,460
Total current liabilities		$17,160
Long-term bonds		$7,800
Total liabilities		$24,960
Common stock		$5,460
Retained earnings		8,580
Total common equity		$14,040
Total liabilities and equity		$39,000
Income Statement (Millions of $)		2016
Net sales		$58,500
Operating costs except depreciation		54,698
Depreciation		1,024
Earnings before interest and taxes (EBIT)		$2,779
Less interest		829
Earnings before taxes (EBT)		$1,950
Taxes		683
Net income		$1,268
Other data:
Shares outstanding (millions)		500.00
Common dividends (millions of $)		$443.63
Int rate on notes payable & L-T bonds		6.25%
Federal plus state income tax rate		35%
Year-end stock price		$30.42

1. Refer to Exhibit 4.1. What is the firm's inventory turnover ratio? Do not round your intermediate calculations.

a. 5.58

b. 5.77

c. 5.30

d. 4.69

e. 5.53

2.

Refer to Exhibit 4.1. What is the firm's total debt to total capital ratio? Do not round your intermediate calculations.

a. 49.92%

b. 65.28%

c. 61.44%

d. 64.00%

e. 48.00%

3.

Refer to Exhibit 4.1. What is the firm's ROA? Do not round your intermediate calculations.

a. 3.38%

b. 2.80%

c. 3.25%

d. 3.97%

e. 4.03%

4.

Refer to Exhibit 4.1. What is the firm's ROE? Do not round your intermediate calculations.

a. 7.76%

b. 9.03%

c. 7.49%

d. 10.02%

e. 7.58%

5.

Refer to Exhibit 4.1. What is the firm's BEP? Do not round your intermediate calculations.

a. 6.70%

b. 7.13%

c. 5.77%

d. 6.48%

e. 5.63%

6.

Refer to Exhibit 4.1. What is the firm's dividends per share? Do not round your intermediate calculations.

a. $0.98

b. $0.78

c. $0.91

d. $0.89

e. $0.99

7.

Refer to Exhibit 4.1. What is the firm's EPS? Do not round your intermediate calculations.

a. $2.54

b. $3.09

c. $2.69

d. $1.93

e. $2.41

8.

Refer to Exhibit 4.1. What is the firm's P/E ratio? Do not round your intermediate calculations.

a. 13.9

b. 12.0

c. 14.6

d. 12.6

e. 13.2

9.

Refer to Exhibit 4.1. What is the firm's market-to-book ratio? Do not round your intermediate calculations.

a. 1.18

b. 1.08

c. 1.35

d. 1.01

e. 1.09

Answer 1

Answer 1.

Inventory turnover ratio = Net sales / Inventories
Inventory turnover ratio = $58,500 / $12,480
Inventory turnover ratio = 4.69

Answer 2.

Total debt to total capital ratio = Total liabilities / Total assets
Total debt to total capital ratio = $24,960 / $39,000
Total debt to total capital ratio = 64.00%

Answer 3.

Return on assets = Net income / Total assets
Return on assets = $1,268 / $39,000
Return on assets = 3.25%

Answer 4.

Return on equity = Net income / Total common equity
Return on equity = $1,268 / $14,040
Return on equity = 9.03%

Answer 5.

Basic earning power = Earnings before interest and taxes / Total assets
Basic earning power = $2,779 / $39,000
Basic earning power = 7.13%

Answer 6.

Dividends per share = Dividend Paid / Shares Outstanding
Dividends per share = $443.63 / 500
Dividends per share = $0.89

Answer 7.

Earnings per share = Net income / Shares Outstanding
Earnings per share = $1,268 / 500
Earnings per share = $2.536 or $2.54

Answer 8.

P/E ratio = Price per Share / Earnings per Share
P/E ratio = $30.42 / $2.536
P/E ratio = 12.0

Answer 9.

Book value per share = Total common equity / Shares outstanding
Book value per share = $14,040 / 500
Book value per share = $28.08

Market-to-book ratio = Market price per share / Book value per share
Market-to-book ratio = $30.42 / $28.08
Market-to-book ratio = 1.08