Financial Ratios
Shown Below Are Some Key Figures from the Balance

question 41

Essay

Financial ratios
Shown below are some key figures from the balance sheets of Minuteman Gas Company for two successive years:
Dividends of $96,000 were declared and paid in 2010. Compute the following:
$$\begin{array} { | l | r | r | } \hline & \text { December } 31,2010 & \text { December } 31,2009 \\\hline \text { Total assets (of which } 30 \% \text { are current) } & \$ 2,820,000 & \$ 2,220,000 \\\hline \text { Current liabilities } & \$ 336,000 & \$ 372,000 \\\hline \text { Bonds payable (long term) } & \$ 1,080,000 & \$ 840,000 \\\hline \text { Capital stock, } \$ 6 \text { par value } & \$ 660,000 & 4660,000 \\\hline \text { Retained Earnings } & \$ 828,000 & \$ 480,000 \\\hline\end{array}$$ $\begin{array}{|l|l|}\hline \text { Current ratio at end of } 2009&\quad\quad\quad \\\hline \text { Current ratio at end of } 2010 \\\hline \text { Working capital at end of } 2009 \\\hline \text { Working capital at end of } 2010 \\\hline \text { Debt ratio at end of } 2009 \\\hline \text { Debt ratio at end of } 2010 \\\hline \text { Earnings per share for } 2010 \\\hline\end{array}$

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Definitions:

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new plant, worthwhile.

Cash Inflows

The total amount of money coming into a business from its various activities, including sales, investments, financing, and more.

Internal Rate

Typically refers to the internal rate of return (IRR), a discount rate that makes the net present value (NPV) of all cash flows from a project or investment equal to zero.