Q: A corporation earns $2.00 per share before taxes. The corporate tax rate is 35%, and the personal tax rate on dividends is 20%. What is the amount left per share after both corporate and personal taxes are paid?

$2.00 \times (1 - 0.35) = $1.30$; $1.30 \times (1 - 0.20) = $1.04$

Q: The market-to-book ratio is calculated as:

$\frac{\text{Price per Share} \times \text{Number of Shares Outstanding}}{\text{Book Equity}}$

Q: Walmart’s accounts receivable is $5,273$ million and its sales are $365,000$ million. What are Walmart’s accounts receivable days?

$\frac{5,273}{365,000} \times 365 = 5.27$ days

Q: Using the DuPont identity, if a firm’s net income is $45.2$ million, sales are $191.1$ million, and total assets are $184.8$ million, what is its return on equity (ROE) if total equity is $131.6$ million?

$\frac{45.2}{191.1} \times \frac{191.1}{184.8} \times \frac{184.8}{131.6} = 17.2\%$

Q: If a firm increases its net profit margin to $4.32\%$ and revenues by $22\%$, while maintaining the higher profit margin and not changing its assets or liabilities, what is its new ROE? Assume total assets are $184.8$ million and total equity is $131.6$ million.

$4.32\% \times 1.22 \times \frac{184.8}{131.6} = 24.7\%$

Q: If forecasted sales are $117,000$ and COGS percent of sales is $72.67\%$, what is the forecasted COGS?

$117,000 \times 0.7267 = 85,024$

Question 1

A corporation earns $2.00 per share before taxes. The corporate tax rate is 35%, and the personal tax rate on dividends is 20%. What is the amount left per share after both corporate and personal taxes are paid?

Accepted Answer

$2.00 	imes (1 - 0.35) = $1.30$; $1.30 	imes (1 - 0.20) = $1.04$

Question 2

Given the following balance sheet data for Global Corporation in 2017 and 2018, what is the change in book value of equity from 2017 to 2018? 2017: $21.0$ million, 2018: $22.3$ million.

Accepted Answer

$22.3$ million - $21.0$ million = $1.3$ million

Question 3

Apple has current assets of $131.72$ billion and current liabilities of $127.97$ billion. What is Apple’s current ratio?

Accepted Answer

$\frac{131.72}{127.97} = 1.03$

Question 4

Apple has inventory of $53.43$ billion. What is Apple’s quick ratio?

Accepted Answer

$\frac{131.72 - 53.43}{127.97} = 0.99$

Question 5

The market-to-book ratio is calculated as:

Accepted Answer

$\frac{	ext{Price per Share} 	imes 	ext{Number of Shares Outstanding}}{	ext{Book Equity}}$

Question 6

Walmart’s accounts receivable is $5,273$ million and its sales are $365,000$ million. What are Walmart’s accounts receivable days?

Accepted Answer

$\frac{5,273}{365,000} 	imes 365 = 5.27$ days

Question 7

Target’s cost of goods sold is $71,475$ million and its inventory is $5,140$ million. What is Target’s inventory turnover?

Accepted Answer

$\frac{71,475}{5,140} = 13.91$ times

Question 8

Using the DuPont identity, if a firm’s net income is $45.2$ million, sales are $191.1$ million, and total assets are $184.8$ million, what is its return on equity (ROE) if total equity is $131.6$ million?

Accepted Answer

$\frac{45.2}{191.1} 	imes \frac{191.1}{184.8} 	imes \frac{184.8}{131.6} = 17.2\%$

Question 9

If a firm increases its net profit margin to $4.32\%$ and revenues by $22\%$, while maintaining the higher profit margin and not changing its assets or liabilities, what is its new ROE? Assume total assets are $184.8$ million and total equity is $131.6$ million.

Accepted Answer

$4.32\% 	imes 1.22 	imes \frac{184.8}{131.6} = 24.7\%$

Question 10

Walmart’s cost of goods sold is $77,300$ and sales are $105,500$. What is Walmart’s COGS percent of sales?

Accepted Answer

$\frac{77,300}{105,500} = 73.28\%$

Question 11

If forecasted sales are $117,000$ and COGS percent of sales is $72.67\%$, what is the forecasted COGS?

Accepted Answer

$117,000 	imes 0.7267 = 85,024$

Question 12

If current net income is $19,870$ and forecasted sales are $190,670$ with a net income percent of sales of $10.4\%$, what is the forecasted net income?

Accepted Answer

$190,670 	imes 0.104 = 19,030$

Question 13

If the retention ratio is $0.51$ and forecasted net income is $19,030$, what is the addition to shareholders’ equity?

Accepted Answer

$19,030 	imes 0.51 = 9,705$

Question 14

If current shareholders’ equity is $31,490$ and the addition to shareholders’ equity is $9,705$, what is the new shareholders’ equity?

Accepted Answer

$31,490 + 9,705 = 41,195$

Question 15

If accounts payable is $1,650$ and forecasted sales are $190,670$ with accounts payable percent of sales of $0.009$, what is the forecasted accounts payable?

Accepted Answer

$190,670 	imes 0.009 = 1,716$

Question 16

If total assets are $31,100$ and total liabilities and equity are $31,100$, what does this indicate about the balance sheet?

Accepted Answer

The balance sheet is balanced, as total assets equal total liabilities and equity.

Question 17

If forecasted sales are $200$ million and the sales growth rate is $0.07$, what are the forecasted sales for the next year?

Accepted Answer

$200 	imes (1 + 0.07) = 214$ million

Question 18

If forecasted costs except depreciation are $174.4$ million and forecasted sales are $200$ million, what is the percent of sales method for costs except depreciation?

Accepted Answer

$\frac{174.4}{200} = 0.872$ or $87.2\%$

Financial Accounting: Key Ratios, Statements, and Forecasting Techniques

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