Question

The following information is available for Culver Corporation. 2017 2016 Current assets $ 65,800 $ 49,590 Total assets 260,000 210,000 Current liabilities 28,000 34,200 Total liabilities 85,800 105,000 Net income 113,375 40,000 Net cash provided by operating activities 90,000 56,000 Preferred dividends 4,000 4,000 Common dividends 4,000 2,000 Expenditures on property, plant, and equipment 29,000 12,000 Shares outstanding at beginning of year 45,000 35,000 Shares outstanding at end of year 80,000 45,000 (a) Compute earnings per share for 2017 and 2016 for Culver. (Round answers to 2 decimal places, e.g. 52.75.) 2017 2016 Earnings per share $enter a dollar amount rounded to 2 decimal places $enter a dollar amount rounded to 2 decimal places (b) Compute the current ratio and debt to assets ratio for each year. (Round answers to 2 decimal places, e.g. 15.25.) 2017 2016 Current ratio enter the ratio rounded to 2 decimal places :1 enter the ratio rounded to 2 decimal places :1 Debt to assets ratio enter percentages rounded to 2 decimal places % enter percentages rounded to 2 decimal places % (c) Compute free cash flow for each year. 2017 2016 Free cash flow $enter a dollar amount $enter a dollar amount

Answer 1

(A) EPS 2.43 // 1.03

(B) current ratio 2.35 // 1.45

debt to assets 0.33 // 0.5

(C) free cash flow 61,000 // 44,000

Step-by-step explanation:

(a) Compute earnings per share for 2017 and 2016 for Culver.

(net income - preferred dividiends) / outstanding shares

(113,375 - 4,000) / 45,000 = 2.43

(40,000 - 4,000) / 35,000 = 1.03

(b) current ratio and debt to assets ratio for each year

current assets / current liab

65,800 / 28,000 = 2.35

49,590 / 34,200 = 1.45

liab / assets

85,800 / 260,000 = 0.33

105,000 / 210,000 = 0.5

(c) Compute free cash flow for each year

free cash flow:

operating cashflow - capex

90,000 - 29,000 = 61,000

56,000 - 12,000 = 44,000