Buy Now and Gerald's EZ Furniture are two publicly traded rental companies. They reported the following...

Question

Question

Buy Now and Gerald's EZ Furniture are two publicly traded rental companies. They reported the following...

Buy Now and Gerald's EZ Furniture are two publicly traded rental companies. They reported the following in their financial statements (in millions of dollars, except per-share amounts and stock prices):

Required:

1-a. Compute the 2016 ROE for each company. Express ROE as a percentage. TIP: Remember that the bottom of the ROE ratio uses the average stockholders' equity.

1-b. Which company appears to generate greater returns on stockholders' equity in 2016?

2-a. Compute the 2016 P/E ratio for each company.

2-b. Which company do investors appear to value more?

Complete this question by entering your answers in the tabs below.

business accounting

Add a comment Improve this question Transcribed image text

Answer 1

✔ Recommended Answer

Answer #1

1a) Calculate ROE

ROE= Net income/Average equity

Buy Now = 115/1138.50 = 10.1%

Gerald's EZ Furniture = 122/1318 = 9.3%

1b) Buy Now

2a) Price earning ratio = MPS/EPS

Buy Now = 25.32/1.53 = 16.5 Times

Gerald's EZ Furniture = 28.22/2.28 = 12.4 Times

2b) Buy Now

answered by: Allen

Add a comment

Answer 2

Similar Homework Help Questions

Buy Now and Gerald's EZ Furniture are two publicly traded rental companies. They reported the following...

Buy Now and Gerald's EZ Furniture are two publicly traded rental companies. They reported the following in their financial statements (in millions of dollars, except per-share amounts and stock prices): 2016 2015 2016 2015 Net income $ 128 $ 180 $ 135 $ 189 Total stockholders' equity 1,127 1,150 1,333 1,235 Earnings per share 1.66 2.35 2.41 3.15 Stock price when annual results reported 31.82 30.37 34.72 36.13 Required: 1-a. Compute the 2016 ROE for each company. Express ROE as...
Delta Air Lines, Inc., and Southwest Airlines Co. are two publicly traded airline companies. They reported the followin...

Delta Air Lines, Inc., and Southwest Airlines Co. are two publicly traded airline companies. They reported the following in their financial statements (in millions of dollars, except per-share amounts and stock prices): Net income Total stockholders' equity Earnings per share Stock price when annual results reported Delta 2016 2015 $ 4,373 $ 4,526 12,287 10,850 5.82 5.68 Southwest 2016 2015 $2,244 $2,181 8,441 7,358 3.58 3.30 49.51 46.10 53.23 35.69 Required: 1-a. Compute the 2016 ROE for each company. Express...
Two online magazine companies reported the following in their financial statements: Net income Total stockholders' equity...

Two online magazine companies reported the following in their financial statements: Net income Total stockholders' equity Earnings per share Stock price when annual results reported BusinessWorld 2015 2014 $ 111,500 $108,904 602,186 527,814 3.50 3.49 55.15 51.79 Fun and Games 2015 2014 $ 92,920 $172,473 462,151 482,049 2.40 4.28 33.30 60.45 Required: 1-a. Compute the 2015 ROE for each company. (Round your answers to 1 decimal place.) ROE BusinessWorld Fun and Games 1-b. Which company appears to generate greater returns...

Two online magazine companies reported the following in their financial statements: Net income Total stockholders' equity...

Two online magazine companies reported the following in their financial statements: Net income Total stockholders' equity Earnings per share Stock price when annual results reported BusinessWorld 2015 2014 $106,500 $107,904 552,186 477,814 2.30 2.49 Fun and Games 2015 2014 $87,500 $ 171,473 412,151 432,049 1.40 3.28 52.65 49.29 30.80 57.95 Required: 1-a. Compute the 2015 ROE for each company. (Round your answers to 1 decimal place.) ROE BusinessWorld Fun and Games h Which company appears to generate greater returns on...
Pick two publicly traded companies in the same industry. Apple Inc. and Microsoft 2. Calculate the...

Pick two publicly traded companies in the same industry. Apple Inc. and Microsoft 2. Calculate the ratios for 2015 and 2016 that you deem necessary for each company for two years. Some examples are working capital, current ratio, current cash debt coverage ratio, inventory turnover ratio, days in inventory, receivables turnover ratio, average collection period, debt to asset ratio, cash debt coverage ratio, times interest earned ratio, free cash flow, earnings per share, price earnings ratio, gross profit rate, profit...
Publicly traded companies file their financial statements with SEC (Securities Exchange Commission) periodically. 10K report refers...

Publicly traded companies file their financial statements with SEC (Securities Exchange Commission) periodically. 10K report refers to their annual filings and 10Q refers to their quarterly filings. You can access this information from company webpage (usually via a link named "investor relations", "legal", or "company information" Every publicly traded company has a link for investors on their webpage where they have all their published financial statements. Find AMAZON's 2016 and 2017 end of year (10K) Balance Sheet on the company...

Publicly traded companies file their financial statements with SEC (Securities Exchange Commission) periodically. 10K report refers...

Publicly traded companies file their financial statements with SEC (Securities Exchange Commission) periodically. 10K report refers to their annual filings and 10Q refers to their quarterly filings. You can access this information from company webpage (usually via a link named "investor relations", "legal", or "company information" Every publicly traded company has a link for investors on their webpage where they have all their published financial statements. Find AMAZON's 2016 and 2017 end of year (10K) Balance Sheet on the company...
An investor has an opportunity to buy stock in two publicly traded companies: Avvoltoio Airlines and...

An investor has an opportunity to buy stock in two publicly traded companies: Avvoltoio Airlines and Unctuous Energy. If the investor puts her money in a stock, and the company does well, she earns a return of $14. If the company does not do well, she earns $2. Avvoltoio tends to do well when oil prices are low; Unctuous tends to do well when oil prices are high. The returns are therefore negatively correlated. Returns have the following probability distribution....
1. Pick two publicly traded companies in the same industry. 2. Calculate the ratios from your...

1. Pick two publicly traded companies in the same industry. 2. Calculate the ratios from your textbook or any other ratios you deem necessary for each company for two years. Some examples are working capital, current ratio, current cash debt coverage ratio, inventory turnover ratio, days in inventory, receivables turnover ratio, average collection period, debt to asset ratio, cash debt coverage ratio, times interest earned ratio, free cash flow, earnings per share, price earnings ratio, gross profit rate, profit margin...

. An investor has an opportunity to buy stock in two publicly traded companies: Avvoltoio Airlines...

. An investor has an opportunity to buy stock in two publicly traded companies: Avvoltoio Airlines and Unctuous Energy. If the investor puts her money in a stock, and the company does well, she earns a return of S14. If the company does not do well, she earns S2. Avvoltoio tends to do well when oil prices are low; Unctuous tends to do well when oil prices are high. The returns are therefore negatively correlated. Returns have the following probability...

Buy Now and Gerald's EZ Furniture are two publicly traded rental companies. They reported the following...

Homework Answers

Add Answer to:
Buy Now and Gerald's EZ Furniture are two publicly traded rental companies. They reported the following...

Post as a guest

Earn Coins