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8. This question is based on the information provided in the abbreviated year-end Income Statement and abbreviated year-end Balance Sheet for NMC Corporation shown below.
NMC Corporation Income Statement for the Calendar Year (January 1 - December 31)
Thousands of dollars (except stock price, earnings per share, and dividends per share)
Net sales
$3000
Cost and expenses:
$2734
EBIT
$266
Less interest expense:
$66
Earnings before taxes
$200
Taxes
$80
Net income before preferred dividends
$120
Dividends to preferred stockholders
$8
Net income available to common stock holders
$112
Per share common stock:
Stock Price
$26.50
Earnings per share
$2.24
Dividends per share
$1.84
NMC Corporation Balance Sheet (Average of beginning and end of year)
Assets (thousands of dollars)
Liabilities and Equity (thousands of dollars)
Cash
$50
Accounts payable
$60
Market securities
$0
Notes payable
$100
Accounts receivable
$350
Accrued Wages
$10
Inventories
$300
Accrued Taxes
$130
Total Current Assets:
$700
Total Current Liabilities:
Net plant and equipment:
$1300
Total Long Term Debt:
$800
Total Stock Holder’s Equity:
$900
Total Assets:
$2000
Total liabilities and equity:
8a. Calculate the NMC financial ratios contained in the following table
Financial Ratios
NMC Values
Industry Values
Current Ratio
2.5 times
Quick (Acid) Ratio
1.0 times
Total Debt to Total Assets
40%
Return on Assets (ROA)
9%
Price/Earnings Ratio
12.5 times
8b. Compare your results to the industry ratios and describe what NMC should do to improve its position in the market.
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