Question

The following information is available for Cheyenne Corp..

2022 2021
Current assets $ 56,880 $ 39,625
Total assets 242,000 207,000
Current liabilities 23,700 31,700
Total liabilities 70,180 84,870
Net income 81,700 51,615
Net cash provided by operating activities 91,700 57,700
Preferred dividends 9,705 9,705
Common dividends 4,700 3,200
Expenditures on property, plant, and equipment 28,700 13,700
Common shares outstanding at beginning of year42,000 31,700
Common shares outstanding at end of year 77,000 44,500
(a) Compute earnings per share for 2022 and 2021 for Cheyenne. (Round Earnings per share to 2 decimal places, e.g. $2.78.) 2022 2021
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 ratio answers to 2 decimal places, e.g. 15.25 and percentage answers to 0 decimalplaces, e.g. 15%.)
2022 2021
Current ratio
enter current ratio rounded to 2 decimal places :1 enter current 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.
2022 2021
Free cash flow
$enter a dollar amount $enter a dollar amount

Answer 1

(a) Earnings per share for 2022 and 2021 for Cheyenne are as follows:

Earnings per share for 2002 = $1.21

Earnings per share for 2001 = $1.10

(b) The current ratio and debt to assets ratio for each year are as follows:

Current ratio for 2002 = 2.40

Current ratio for 2001 = 1.25

Debt to assets ratio for 2002 = 29%

Debt to assets ratio for 2001 = 41%

(c) Free cash flow for each year are as follows:

Free cash flow for 2002 = $63,000

Free cash flow for 2001 = $44,000

Step-by-step explanation:

(a) Compute earnings per share for 2022 and 2021 for Cheyenne. (Round Earnings per share to 2 decimal places, e.g. $2.78.)

These can be calculated using the following formula:

Earnings per share = (Net income - Preferred dividends) / Average shares outstanding ..................... (1)

Where;

Average common shares outstanding = (Common shares outstanding at beginning of year + Common shares outstanding at end of year) / 2

Using equation (1), we have:

Earnings per share for 2002 = (81,700 - 9,705) / ((42,000 + 77,000) / 2) = $1.21

Earnings per share for 2001 = (51,615 - 9,705) / ((31,700 + 44,500) / 2) = $1.10

(b) Compute the current ratio and debt to assets ratio for each year. (Round ratio answers to 2 decimal places, e.g. 15.25 and percentage answers to 0 decimal places, e.g. 15%.)

These can be calculated using the following formula:

Current ratio = Current assets / Current liabilities ................... (2)

Debt to assets ratio = (Total liabilities / Total assets) * 100 .............. (3)

Using equation (2), we have:

Current ratio for 2002 = 56,880 / 23,700 = 2.40

Current ratio for 2001 = 39,625 / 31,700 = 1.25

Using equation (3), we have:

Debt to assets ratio for 2002 = (70,180 / 242,000) * 100 = 29%

Debt to assets ratio for 2001 = (84,870 / 207,000) * 100 = 41%

(c) Compute free cash flow for each year.

These can be calculated using the following formula:

Free cash flow = Net cash provided by operating activities - Expenditures on property, plant, and equipment .................(4)

Using equation (4), we have:

Free cash flow for 2002 = $91,700 - $28,700 = $63,000

Free cash flow for 2001 = $57,700 - $13,700 = $44,000