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Ratio Analysis and Time Value of Money

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Module 4 Critical Thinking Assignment

Ratio Analysis and Time Value of Money

Problem 4-1

RATIO ANALYSIS (Chapter 4)

The Balance Sheet and the Income Statement for XYZ Manufacturing Corporation are as

follows:

DATA (All amounts in SAR unless otherwise indicated, and all sales are on credit.)

Balance Sheet:

Cash

400,000

Acct/Rec

725,000

Inventories

650,000

Current assets

1,775,000

Net fixed assets

690,000

Total assets

2,465,000

Accts/Pay

Accrued expenses

Short-term N/P

Current liabilities

Long-term debt

Owner’s equity

Total liabilities and owners’ equity

265,000

310,000

80,000

655,000

950,000

860,000

2,465,000

Income Statement:

Net sales

COGS

Gross profit

Operating expenses

Net operating income

Interest expense

EBT

Income taxes

Net income

9,550,000

4,866,000

4,684,000

2,984,000

1,700,000

45,000

1,655,000

662,000

993,000

Calculate the following ratios:

Current ratio =

Acid test ratio =

Debt ratio =

Operating profit margin =

Operating return on assets =

Return on equity =

Times interest earned =

Average collection period =

Inventory turnover =

Fixed asset turnover =

Total asset turnover =

Problem 4-2

MARKET-VALUE RATIOS (Chapter 4)

Jeddah Industries has a price earning ratio of 11X.

a. If Jeddah’s earnings per share are SAR 42.00, what is the price per share of Jeddah’s stock?

b. Using the price per share you calculated in part a, determine the price / book ratio if

Jeddah’s equity-book value is 17.40.

Solution

a. Price per share

b. Price/book ratio

Problem 4-3

FUTURE VALUE CALCULATIONS (Chapter 5)

To what amount will the following investments accumulate?

Annual

Amount Invested (SAR)

Interest

Years

80,000

5%

5

60,000

4%

12

35,500

12%

4

97,000

7%

15

Problem 4-4

PRESENT VALUE CALCULATIONS (Chapter 5)

What is the present value of the following future amounts?

Annual

Future Amount (SAR)

Interest

Years

900,000

5%

5

478,000

4%

12

279,000

12%

4

440,000

7%

15

Problem 4-5

COMPOUND ANNUITY CALCULATIONS (Chapter 5)

What is the accumulated future sum of each of the following Ordinary annuities?

Annual

Present Amount (SAR)

Interest

Years

20,000

5%

5

42,000

4%

12

8,000

12%

4

19,500

7%

15

Problem 4-6

PRESENT VALUE OF ANNUITY CALCULATIONS (Chapter 5)

What is the present value of each of the following Ordinary annuities?

Annual

Present Amount (SAR)

Interest

Years

20,000

12%

5

42,000

5%

12

8,000

4%

4

19,500

2%

5

Problem 4-7

COMPOUND INTEREST AT NON-ANNUAL RATES (Chapter 5)

Given the annual interest rates below, and the compounding period indicated,

calculate the FUTURE VALUE for each item.

Annual

Compounding

Present Amount (SAR)

Interest

Years

Period

20,000

6%

5

Semi-annually

42,000

4%

12

Quarterly

8,000

12%

4

Monthly