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Sunday, February 6, 2011

Financial ratios

Solution is available here for U$3.00

                                                 2005              2006
Operation assets                         2000               2700
     Marketable debt security               400                100
     Operating liabilities                      (100)              (300)
Bonds payable                            (1400)             (1300)
Book value
                                                  $900              $1200
Sales                                                                  2100
Operating expenses                                             (1677)
Interest revenue                                                   27
Interest expenses                                                (137)
     Tax expense (rate=34%)                                      (106)
Earning (net)                                                        207

a. Calculate the dividends, net of capital contribution, for 2006.

b. Calculate ROCE, use average net book value in the denominator.
c. Calculate RNOA for 2006, use the average net operating assets in the denominator.
d. 1. Supply the numbers for the formula ROCE = pm*ato+(financial leverage*(RNOA – BORROWING COST)
• The firm’s short term borrowing rate is 4.5% after tax, supply the numbers for the formula. @ RNOA = ROOA +(OLLEV * OLSPREAD)

    e. repeat the exercise in part a using the following information  


                                                 2005              2006
Operation assets                         2000              2700
Marketable debt security               800                1000
Operating liabilities                      (100)              (300)
Bonds value (net)                         2700              3400
                                                  
Sales                                                                 2100
Operating expenses                                             (1677)
Interest revenue                                                   90
tax expense (rate=34%)                                      (174)
Earning (net)                                                        339

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