Liquidity

(1) Net working capital  Current assets – Current

liabilities:
a. i. EPS 
 $150 – $100  $50
(2) Current ratio  Current assets/Current
liabilities For Financial Learning Systems:
 $150/$100  1.50

Activity
EPS 
(3) Total asset turnover  Sales/Total assets
 $500/$350  1.43

Leverage (ii) Price/earning (P/E) ratio 

(4) Debt-equity ratio  Long-term For Financial Learning Systems:
debt/Stockholders’ equity
 $50/$200  0.25
(5) Times interest earned  Earnings before interest
and taxes/Interest P/E 
 $65/$10  6.50
Profitability
(6) Net profit margin  Net profits after
taxes/Sales
(iii) Book value per share 
 $35/$500  7.0%
For Financial Learning Systems:
(7) Return on total assets  Net profits after
taxes/Total assets
 $35/$350  10.0%
(8) Return on equity  Net profits after
taxes/Stockholders’ equity
 $35/$200  17.5%
b. If the EPS rises to $3.75:
Common Stock Ratios 17.72 
(9) Earnings per share  (Net profits after taxes –
Preferred dividends)/
Number of shares of
common stock outstanding
 $35 – 0/10  $3.50 per Market price of stock  $66.45
share If the EPS drops to $1.50:
(10) Price/earnings ratio  Share price/EPS
 $75/$3.50  21.43 times
(11) Price-to-sales ratio  Share price/Sales per
share
 $75/($500/10)  1.50
(12) Dividends per share  Total common dividends
paid/Common shares outstanding
 $10/10  $1 per share c. If the EPS rises to $3.75 and P/E jumps to 25:
(13) Dividend yield  Dividends per
share/Share price
 $1/$75  1.33%
(14) Payout ratio  Dividends per share/EPS
 $1/$3.50  29%
(15) Book value per share  Common
equity/Common shares outstanding
d. Both the EPS and P/E drop—to $1.50 and 10 times earnings:
 $200/10  $20
(16) Price-to-book value  Share price/Book value
per share
 $75/$20  $3.75

e. As shown in the case of Financial Learning Systems, higher earnings improve the stock price
for a given P/E multiple, and when the P/E multiple rises, for a given level of earnings, the
stock price rises.
Fórmula Básica: VP = VF x FIVP

Anualidad

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