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    Chapter 2 Team Project

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    Raisa Tasnim
    Martin Manufacturing Company reported net profits of $36,000 on revenues of $5,075,000 for the year ended December 31, 2006. It had earnings per share of $0.33. Based on the stock price of $11.38 and 100,000 shares outstanding, the P/E ratio is 34.4. The market value of equity is $1,138,000 and the book value of equity is $1,343,750, so the M/B ratio is 0.85.

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    Chapter 2 Team Project

    Uploaded by

    Raisa Tasnim
    42 views2 pages
    Martin Manufacturing Company reported net profits of $36,000 on revenues of $5,075,000 for the year ended December 31, 2006. It had earnings per share of $0.33. Based on the stock price of $11.38 and 100,000 shares outstanding, the P/E ratio is 34.4. The market value of equity is $1,138,000 and the book value of equity is $1,343,750, so the M/B ratio is 0.85.

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    Martin Manufacturing Company reported net profits of $36,000 on revenues of $5,075,000 for the year ended December 31, 2006. It had earnings per share of $0.33. Based on the stock price of $11.38 and 100,000 shares outstanding, the P/E ratio is 34.4. The market value of equity is $1,138,000 and the book value of equity is $1,343,750, so the M/B ratio is 0.85.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    42 views2 pages

    Chapter 2 Team Project

    Uploaded by

    Raisa Tasnim
    Martin Manufacturing Company reported net profits of $36,000 on revenues of $5,075,000 for the year ended December 31, 2006. It had earnings per share of $0.33. Based on the stock price of $11.38 and 100,000 shares outstanding, the P/E ratio is 34.4. The market value of equity is $1,138,000 and the book value of equity is $1,343,750, so the M/B ratio is 0.85.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
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    of 2

    Chapter 2 Case : Assessing Martin Manufacturing’s

    Current Financial Position


    Using the following information, I need the Price/Earnings (P/E) ratio and the Market/Book (M/B) ratios.

    Martin Manufacturing Company


    Income Statement for the

    Year Ended December 31, 2006

    Sales revenue   $5,075,000

    Less: Cost of goods sold   3,704,000

    Gross profits   $1,371,000

    Less: Operating expenses    

      Selling expense $650,000  


      General and administrative expenses 416,000  
      Depreciation expense 152,000
    Total operating expense   1,218,000

    Operating profits   $ 153,000

    Less: Interest expense   93,000

    Net profits before taxes   $ 60,000

    Less: Taxes (rate = 40%)   24,000

    Net profits after taxes   $ 36,000

    Less: Preferred stock dividends   3,000

    Earnings available for common   $ 33,000


    stockholders

    Earnings per share (EPS)   $0.33


    Martin Manufacturing Company
    Balance Sheets

         December 31

    Assets    2006 2005


    Current assets    
      Cash $ 25,000 $ 24,100
      Accounts receivable 805,556 763,900
      Inventories 700,625 763,445
        Total current assets $1,531,181 $1,551,445
    Gross fixed assets (at cost) $2,093,819 $1,691,707
    Less: Accumulated depreciation 500,000 348,000
    Net fixed assets $1,593,819 $1,343,707
    Total assets $3,125,000 $2,895,152
    Liabilities and Stockholders’ Equity

    Current liabilities    

      Accounts payable $ 230,000 $ 400,500

      Notes payable 311,000 370,000

      Accruals 75,000 100,902

        Total current liabilities $ 616,000 $ 871,402

    Long-term debt $1,165,250 $ 700,000


        Total liabilities $1,781,250 $1,571,402
    Stockholders’ equity    
      Preferred stock (2,500 shares, $1.20 dividend) $ 50,000 $ 50,000
      Common stock (100,000 shares at $4 par)a 400,000 400,000
     
    Paid-in capital in excess of par value 593,750 593,750

      Retained earnings 300,000 280,000


        Total stockholders’ equity $1,343,750 $1,323,750
    Total liabilities and stockholders’ $3,125,000 $2,895,152
    equity

    a
    The firm’s 100,000 outstanding shares of common stock closed 2006 at a
    price of $11.38 per share.

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