Assume the following data for Cable Corporation and Multi-Media Inc.
c. Discuss the factors from part b that added or detracted from one firm
having a higher return on stockholders’ equity than the other firm as
computed in part a.
The return on stockholder’s equity of Multimedia Incorporation is more than that of Cable corporation because the return on the sales of Capable corporation has a higher return than Multimedia Incorporation (9.84% vs. 5.19%).
However, Multimedia Incorporation has a higher return than Capable corporation on total assets (14.51% versus 7.76%) because the total asset turnover of Multimedia Incorporation is more than that of the Cable Corporation (279.79% versus 78.86%). This factor alone leads to a higher return on total assets.
Return on stockholder’s Equity
Return on stockholder’s equity of multimedia Incorporation is more than that of Capable corporation because the net income of multimedia incorporation is more than that of Capable corporation.
Net income to sales
Net Income to total assets
Sales to total assets
Net income to sales of Multimedia incorporation is less than that of Capable corporation due to the increase in the sale of Multimedia incorporation.
Net income to total assets of multimedia incorporation is more than that of Capable corporation because the total assets of Multimedia incorporation are more than that of Capable corporation.
In addition, sales to total assets of Multimedia incorporation are more than that of Capable corporation because the net sales of Multimedia incorporation are more than that of Capable corporation.
Identify whether each of the following items increases or decreases cash flow:
Increase in accounts receivable
Decrease in prepaid expenses
Increase in notes payable
Increase in inventory
Increase in investment
Increase in accrued expenses
Decrease in account payable
Amigo Software Inc. has total assets of $889,000, current liabilities of $192,000, and long-term liabilities of $154,000. There is $87,000 in preferred stock outstanding. Thirty thousand shares of common stock have been issued.
a. Compute book value (net worth) per share.
b. If there is $56,300 in earnings available to common stockholders and the
firm’s stock has a P/E of 23 times earnings per share, what is the current price of the stock?
c. What is the ratio of market value per share to book value per share? (Round
to two places to the right of the decimal point.)
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