13.Below is the balance sheet for a company:
| 2001 | 2002 |
| | |
Cash | 300 | 330 |
Accounts receivables | 630 | 650 |
Inventories | 600 | 660 |
Other current assets | 300 | 320 |
| | |
Gross PP&E | 5,860 | 6,890 |
Less accumulated depreciation | 1,740 | 2,100 |
Net PP&E | 4,120 | 4,790 |
Deferred tax assets | 60 | 55 |
Goodwill | 920 | 900 |
Other fixed assets | 120 | 120 |
| | |
Total assets | 7,050 | 7,825 |
| | |
Accounts payable | 420 | 480 |
Current portion of LTD | 600 | 600 |
Notes payable | 130 | 95 |
Other current liabilities | 180 | 180 |
Deferred tax liabilities | 60 | 70 |
Long-term debt | 1,800 | 1,200 |
Common stock | 1,940 | 1,960 |
Paid in capital | 420 | 870 |
Retained earnings | 1,500 | 2,370 |
| | |
Total | 7,050 | 7,825 |
The footnotes indicate that the company sold 600 of receivables with recourse to a subsidiary.
After adjusting the balance sheet for current value, the current ratio is:
A) 1.44.
B) 1.89.
C) 1.31.
D) 1.23.
14.After adjusting the financial statements to current value, the long-term debt to asset ratio is (note: do not include deferred tax liabilities as part of long-term debt):
A) 15.3%.
B) 15.9%.
C) 18.3%.
D) 24.3%.
15.Star Chemical Inc. (SCI) reported the following year-end data:
Depreciation expense | $25 million |
Net income | $35 million |
Dividends | $10 million |
Total assets | $250 million |
Shareholder’s equity | $195 million |
Effective tax rate | 35 percent |
SCI also reported that it changed from an accelerated depreciation method to straight line depreciation. The change resulted in a decrease in depreciation expense of $5 million. Management felt that the change “would not have a material effect on financial performance measures.” What are the return on assets (ROA) and return on equity (ROE) measures under the old depreciation methods?
A) ROA is 13.30% and ROE is 17.21%.
B) ROA is 13.50% and ROE is 17.66%.
C) ROA is 12.96% and ROE is 16.71%.
D) ROA is 13.67% and ROE is 17.21%.
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