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    Calculate Financial Ratios for Pro Forma

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    1. Problem-solving: Use the following data from a firm's pro forma (i.e., projected or forecasted) financial statements to calculate the following profitability ratios for the firm, assuming that all stocks are common stocks: (a) net profit margin; (b) return on total assets; (c) return on equity; (d) price-earnings ratio.

    Sales $150 million

    Net income 12 million

    Total Assets 600 million

    Stockholders' Equity 200 million

    Number of Common Stock Shares 4 million

    Price per share of common stock $50.00

    2. Problem-solving: Use the following data from a firm's pro forma financial statements to calculate the following ratios for the firm: (a) current ratio to measure liquidity; (b) debt-equity ratio to measure leverage; (c) accounts receivable turnover to measure efficiency; (d) accounts payable turnover to measure efficiency.

    Current Assets $200 million

    Current Liabilities 150 million

    Total Liabilities 400 million

    Stockholders' Equity 200 million

    Sales 150 million

    Accounts Receivable 80 million

    Costs of Goods Sold 130 million

    Accounts Payable 65 million

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    https://brainmass.com/business/finance/calculate-financial-ratios-pro-forma-423505

    Solution Preview

    1.
    (a) Net profit margin = Net income/Sales
    Net profit margin = $12,000,000/$150,000,000
    Net profit margin = .08 (or 8 percent)

    (b) Return on total assets = Net income/Total assets
    Return on total assets = $12,000,000/$600,000,000
    Return on total assets = .02 (or 2 percent)

    (c) Return on equity = Net income/Total ...

    Solution Summary

    This solution illustrates how to calculate various financial ratios.

    $2.19

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