Answer the Following Questions Using the Information Below

question 52

Multiple Choice

Answer the following questions using the information below:
The following information pertains to the January operating budget for Canberra Corporation.
∙ Budgeted sales for January $100 000 and for February $200 000.
∙ Collections for sales are 70% in the month of sale and 30% the next month.
∙ Gross margin is 30% of sales.
∙ Administrative costs are $10 000 each month.
∙ Beginning accounts receivable is $20 000.
∙ Beginning inventory is $14 000.
∙ Beginning accounts payable is $60 000.(All from inventory purchases. )
∙ Purchases are paid in full the following month.
∙ Desired ending inventory is 20% of next month's cost of goods sold (COGS) .
-At the end of January,budgeted ending inventory is:

• A)$40 000.
• B)$28 000.
• C)$20 000.
• D)None of these answers are correct.

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Definitions:

Capitalized Earnings Model

A valuation method in which earnings are considered in perpetuity, with a capitalization rate determining the present value of those earnings.

P/E Ratio

Price-to-Earnings Ratio, a valuation metric calculated by dividing the market price per share by its earnings per share, indicating how much investors are willing to pay per dollar of earnings.

EPS

Earnings Per Share, a key financial metric indicating the profitability of a company, calculated as the company's profit divided by the outstanding shares of its common stock.

P/E Multiple

Price-to-Earnings ratio, a valuation metric for stocks that compares a company's market price per share to its earnings per share.