Callaway Golf Company
Exercise 2-7
- EARNINGS PER SHARE
Workings
EPS= (net income- preferred dividend) / number of outstanding shares
2017
EPS = 60,500,000/ 64,507,000
EPS= $0.94
2016
EPS = 49, 400,000/66,282,000
EPS=$0.75
Problem 2-7A
- WORKING CAPITAL
Workings
Working capital = Current assets- current liabilities
Target
WC= $16,100- 10,300
=$5,800
Wal-Mart
WC= 48,600-56,300
= ($7,700)
- CURRENT RATIO
Current ratio = current assets/ current liabilities
Target
Current ratio= 16,100/10,300
=1.56
Wal-Mart
Current ratio= 48,600/56,300
=0.86
- DEBT TO ASSETS RATIO
= total debt (Liability)/ total assets
Target
=45,900/30,700 *100%
=150 %
Wal-Mart
=159,000/99,200* 100%
=160 %
- FREE CASH FLOW
= cash from operations- capital expenditure
Target
= 4,470- 3,310
=$1,160
Wal-Mart
=23,600-11,700
=$11,900
- Earnings per share
EPS= (net income- preferred dividend) / number of outstanding shares
Target
=3,278,000/ 780,000
=$4.20
Wal-Mart
= 18,450,000/ 3,800,000
= $4.86
(f)
Liquidity
Liquidity ratios measure a company ability to offset its short term obligation and how quickly it converts its assets to cash
A common ratio of liquidity is the current asset ratio. Target has a better current ratio of 1.56 compared to Wal-Mart current ratio of 0.86.
Target has a better liquidity
Solvency
Solvency ratio measure a company’s ability to meet its long-term obligations. A common solvency ratio is debt to asset ratio. Wal-Mart has a better debt to asset ratio of 1.60 compared to Target debt ratio of 1.50.
Wal-Mart has a better solvency
Problem 2-4 A
Blue Spruce
NET INCOME
= 2,268,000-1,480,500-356,580-11,340-107,100- 45,360
= $267,120
Flounder Corp
=781,200-428,400-123,480-4,788-45,360-18,900
=$160,272
EARNINGS PER SHARE
EPS= (net income- preferred dividend) / number of outstanding shares
Blue Spruce
EPS= 267,120/ 80,000
=$3.40
Flounder Corp
EPS= 160,272/50,000
=$ 3.21
(b)
WORKING CAPITAL
Working capital = Current assets- current liabilities
Blue Spruce
=476,100-83,570
=$39,530
Flounder Corp
=200, 236-42,482
=$157,754
CURRENT RATIOS
= current assets/ current liabilities
Blue Spruce
=476,100/83,570
=5.70
Flounder Corp
=200,236/ 42,482
=4.71
(c)
DEBT TO ASSET RATIO
=total debt (Liability)/ total assets
Blue Spruce
=220,280/1146420 *100%
=19%
Flounder Corp
=93,744/376,293* 100%
=25%
FREE CASH FLOW
=cash from operations- capital expenditure
Blue Spruce
=173,880-113,400
= $60,480
Flounder Corp
=45,360-25,200
= $20,160
Exercise 2-13
(a) Historical cost concept
(b) Business entity concept
(c) Consistency principle
Exercise 2-11
- CURRENT RATIO
=current assets/ current liabilities
2017
=897,600/408,000
=2.2
2016
=942,500/362,500
=2.6
- Earnings per share
EPS= (net income- preferred dividend) / number of outstanding shares
2017
170,000/202,000
=$0.84
2016
392,800/212,400
=$1.85
- DEBT TO ASSET RATIO
= total debt (Liability)/ total assets
2017
=558,500/1,957,600*100%
=29%
2016
=514,800/1,820,500
=28%
(d) FREE CASH FLOW
= cash from operations- capital expenditure
2017
=286,000-253,000
=$33,000
2016
=467,700-265,200
=$202,500
