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FINANCIAL STATEMENT ANALYSIS
ANSWER KEY
14.
What percent of Fruit Packing, Inc.'s capital structure is provided by debt?
d) 57.38%
Debt Ratio = (Total Debt) / (Total Assets)
= ($45.1 + $45.1) / ($157.2)
= 57.38%
Include Current Liabilities and Long-term Debt for Total Debt
15.
What percentage of each dollar from
S
ALES
is available for common shareholders?
b) 9.69%
Profit Margin = (Net Income to Common) / (Sales)
= ($14.6) / ($150.6)
= 9.69%
16.
If Fruit Packing, Inc.'s stock price is $15.24 per share and there are 6.5 million shares
outstanding, how much are investors willing to pay for every dollar of reported
profits?
d) 6.78 times
Price / Earnings = (Market price per share) / (Earnings per share)
First we calculate the Earnings per share:
Earnings / Share = (Net Income to Common) / (Number of shares)
= ($14.6) / (6.5 shares)
= $2.2462 per share
Now we can calculate the Price / Earnings Ratio:
Price / Earnings
= ($15.24 per share) / ($2.2462 per share)
= 6.78 times