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.

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

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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