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Expert-verified Found in: Page 477 ### Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

# The financial statements for Chicago Refrigerator Inc. (see Tables 14.15 and 14.16 ) areto be used to compute the ratios a through h for 2013.a. Quick ratio.b. Return on assets.c. Return on common shareholders’ equity.d. Earnings per share of common stocke. Profit margin.f. Times interest earned.g. Inventory turnover.h. Leverage ratio. a. 0.99

b. 36.4%

c. 42.6%

= 0.9979

## Step 2: Calculation of ROA

ROA = EBIT / Assets

= Net income before tax + Interest expense / Average assets

= $2,259 +$78 / ($8,058 +$4,792) / 2

=.364

= 36.4%

## Step 3: Calculation of Return on common shareholder’s equity

Preferred dividend= 0.1 x $25 x 18000 =$45000

Common equity in 2013 = $829 +$575 + $1949 =$3,353 thousand

Common equity in 2012 = $550 +$450 + $1368 =$2,368 thousand

ROE = Net income / Average shareholder’s equity

= .194

=19.4%

## Step 6: Calculation of Times Interest earned

Times interest earned = EBIT / Interest Expense

= 4.2

## Step 8: Calculation of Leverage ratio

Leverage ratio = Average assets / Average equity

=($4792 +$8058) / 2 / ($2,868 +$3,803) / 2

= 1.9 ### Want to see more solutions like these? 