Instruction: This test consist of questions that requires analytical skills. Please show ALL
working. Students are required to answer ALL questions.
Total 70 marks
1. The balance sheet and income statement for the J.P. Robard Mfg. Company are as
follows:
J.P. Robard Mfg, Inc
Balance Sheet (‘000)
Cash
Account receivable
Inventories
Total Current assets
Net fixed assets
Total Assets
500
2,000
1,000
3,500
4,500
8,000
Accounts payable
Accrued expenses
Short-term notes payable
Current liabilities
Long-term debt
Owners’ equity
Total liabilities and owner’s equity
1,100
600
300
2,000
2000
4,000
8,000
J.P. Robard Mfg. Inc
Income Statement (‘000)
Net sales (all credit)
Cost of good sold
Gross profit
Operationg expenses (includes 500 for deprecition)
Net operating income
Interest expense
EBT
Income taxes (40%)
Net Income
Calculate the following ratios:
Current ratio
Time interest earned
8,000
(3,300)
4,700
3,000
1,700
(367)
1,333
(533)
800
(10 marks)
Inventory turnover
Total asset turnover
Operating profit margin
Operating returns on assets
Debt ratio
Average collection period
Fixed asset turnover
Return on equity
2. The common stock of the Brangus Cattle Company had the following end-of-year
stock prices over the least five years and paid no cash dividend.
Tim
price
1
$15
2
10
3
12
4
23
5
25
a. Calculate the annual rate of return for each year from the above
information. (4 marks)
b. What is the arithmetic average of return earned by investing in the
company’s stock over this period? (5 marks)
c. What is the geometric average rate of return earned by investing the
company’s stock over this period? (5 marks)
d. Which type of average rate of return best describes the average annual rate
of return earned over the period (the arithmetic or geometric)? Support
your answer. (2 marks)
3. B.J’s Enterprise is evaluating a security. The current treasury bill rate is 2.9%. Given
the following information, calculate the following investment’s expected rate of
return and its standard deviation. Advise the firm whether or not to invest in this
security. (12 marks)
Probability
.15
.30
.40
.15
Returns
-3%
2%
4%
6%
4. If you deposit $1,000 each year in a savings account earning 4%, compounded
annually, how much will you have in 10 years? (2 marks)
5. Earnings per share for XYZ, Inc. grew constantly from $7.99 in 1974 to $12.68 in
1980. What was the compound annual growth rate in earnings-per-share over the
period?
(3marks)
6. An investment will pay $500 in three years, $700 in five years, and $1,000 in nine
years. If the opportunity rate is 6%, what is the present value of this investment? (3
marks)
7. What is the present value of the following perpetuities?
a.
$600 discounted at 7%
b.
$450 discounted at 12%
c.
$1,000 discounted at 6%
d.
$880 discounted at 9%
(4 marks)
8. A scrambled list of accounts from the income statement and balance sheet of YLC ltd.
Is listed below:
Inventory
Common stock
Cash
Operating expenses
Short-term notes payable
Interest expense
Depreciation expense
Sales
Accounts receivable
Accounts payable
Long-term debt
Cost of goods sold
Buildings and equipment
Accumulated depreciation
Taxes
General & Admin fees
Retained earnings
$
6,500
45,000
16,550
1,350
600
900
500
12,800
9,600
4,800
55,000
5,750
122,000
34,000
1,440
850
?
a. How much is the firm’s net working capital? (2 marks)
b. Complete the income statement and balance sheet (12 marks)
c. How is this firm performing? Support your response. ( 2marks)