Question

Presented here are summarized data from the balance sheets and income statements of Wiper Inc WIPER INC. Condensed Balance Sheets December 31, 2020, 2019, 2018 (in millions) 202e $ 793 2.428 $3,221 $ 592 $ 883 1,734 $2,617 Current assets Other assets Total assets Current liabilities Long-term liabilities Stockholders' equity Total liabilities and stockholders' equity 2019 $1,e21 1,935 $2,956 S845 1,070 1.041 $2,956 1,6e7 1,022 $3,221 WIPER INC. Selected Income Statement and Other Data For the year Ended December 31, 2020 and 2019 (in millions) 2019 2020 $3,065 $2,928 236 Income statement data: Sales Operating income Interest expense Net income Other data: Average number of common shares outstanding Total dividends paid 4 .2 42.8 $65.0 S53.8 Required: 6. Calculate return on investment, based on net income and average total assets for 2020 and 2019 b. Calculate return on equity for 2020 and 2019 c. Calculate working capital and the current ratio for each of the past three years. d. Calculate earnings per share for 2020 and 2019. .. If Wiper's stock had a pricelearnings ratio of 12 at the end of 2020, what was the market price of the stock 1. Calculate the cash dividend per share for 2020 and the dividend yield based on the market price calculated in parte g. Calculate the dividend payout ratio for 2020 h. Assume that accounts receivable at December 31, 2020, totaled $324 million Calculate the number of days sales in receivables a that date. Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019. date the times interest earned ratio for 2020 and 2019.

Answer 1

a) Return on investment= Net income*100/Average total assets

2020

Average total assets= $(3221+2956)/2= $3088.5

Return on investment= $236*100/3088.5= 7.6%

2019

Average total assets= $(2956+2617)/2= $2786.5

Return on investment= $231*100/2786.5= 8.3%

b) Return on equity= Net income*100/Average stockholders' equity

2020

Average stockholders' equity= $(1022+1041)/2= $1031.5

Return on equity= $236*100/1031.5= 22.9%

2019

Average stockholders' equity= $(1041+933)/2= $987

Return on equity= $231*100/987= 23.4%

		2020		2019
a	Return on investment	7.6	%	8.3	%
b	Return on equity	22.9	%	23.4	%

c) Working capital= Current assets-Current liabilities

2020= $793-592= $201

2019= $1021-845= $176

2018= $883-742= $141

Current ratio= Current assets/Current liabilities

2020= $793/592= 1.3

2019= $1021/845= 1.2

2018= $883/742= 1.2

	2020	2019	2018
Working capital	$201	$176	$141
Current ratio	1.3	1.2	1.2

d) Earning per share= (Net income-Preferred dividend)/Weighted average shares outstanding

2020= $236/42.8= $5.51

2019= $231/48.2= $4.79

	2020	2019
Earning per share	$5.51	$4.79

e) Price earning ratio= Market price/earning per share

2020

12= Market price/$5.51

Market price= $5.51*12= $66.12

f) Cash dividend per share= Total cash dividend/Weighted average shares outstanding

= $65/42.8= $1.52

Dividend yield ratio= Cash dividend per share/Market price

= $1.52*100/66.12

= 2.3%

g) Dividend payout ratio= Dividend per share/Earning per share

= $1.52*100/5.51= 27.59%

h) Number of days sales= Account receivable*365/Sales

= $324*365/3065

= 38.58 days

e	Market price	$66.12
f	Cash dividends per share	$1.52
	Dividend yield	2.3	%
g	Dividend payout ratio	27.59	%
h	Number of days' sales	38.58	days

i) Debt ratio= Total liabilities/Total liabilities and stockholders' equity

2020= $(592+1607)*100/3221= 68.3%

2019= $(845+1070)*100/2956= 64.8%

Debt equity ratio= Total liabilities/Total stockholders' equity

2020= $(592+1607)*100/1022= 215%

2019= $(845+1070)*100/1041= 184%

	2020		2019
Debt ratio	68.3	%	64.8	%
Debt equity ratio	215	%	184	%

j) Time interest earned ratio= (Net income+Interest expense)/Interest expense

2020= $(236+99)/99= 3.4 times

2019= $(231+80)/80= 3.9 times

	2020		2019
Time interest ratio	3.4	times	3.9	times