The Media And Claims

• Chapter 5 – The Media and Claims

  Essay Questions.

  Instructions:  Answer the following question below.

  1.

  A.  You are an activist who wants to draw media attention to your claim. Name at least five things suggested in your text that you could do to make your claims appealing to the media.

  2.

  B.  Describe at least three ways that recent changes in the news media have altered the claimsmaking process.

  EACH QUESTION SHOULD BE ANSWERED IN 250 WORDS AND IN A SEPARATE PARAGRAPH

  CHAPTER 5: THE MEDIA AND CLAIMS

  ■ Media processes that affect the claimsmaking process

  ■ News work and constraints on coverage of claims

  ■ Omnipresent deadlines, while they can vary depending on kind of media, necessitate

  tough decisions about what claims are discussed

  ■ The newshole exists because each kind of media has limited amount of space; e.g., a

  thirty-minute national news program has about twenty-two minutes of program time (the

  rest is advertising), and not all of that time is spent on hard news

  ■ The norm is that interesting stories are more likely to be aired/written than less interesting

  ones (novelty)

  ■ Different intended audiences shape what media workers construct as newsworthy

  ■ Balance as a professional norm means frequently media show two sides (but only two),

  and sometimes one if news workers feel there is relative consensus of opinion

  ■ Geography of the media means events in New York City, Los Angeles, and Washington,

  D.C., are more likely to be covered by media due to the greater number of available news

  workers in those cities and the perception that those cities are centers of political and

  cultural importance in the United States

  ■ Media as secondary claimsmakers

  ■ What claimsmakers need to know to acquire media attention

  ■ Package claims in ways that help media to do their jobs and parallel their constraints

  ■ Give media advanced notice of claimsmaking events

  ■ Choose interesting individuals to represent the social movement

  ■ Make events visually interesting (at least for television media coverage)

  ■ Seek out, if possible, media that is narrowcasting toward the audiences claimsmakers are

  seeking to persuade

  ■ News media are not a static entity, but change over time

  ■ Growth of cable channels, especially twenty-four-hour cable news networks which must fill

  their newshole on a daily basis

  ■ Much of the media have transitioned from broadcasting to narrowcasting to targeted

  audiences (audience segmentation)

  ■ Internet’s unlimited carrying capacity for claims

  ■ On one hand, this is wonderful for claimsmakers, who can sometimes bypass the media

   

   

  and reach out directly to intended audiences

  ■ On the other hand, the Internet is unfiltered, so many claims can make it hard for

  audiences to sift and sort claims they encounter

  ■ Packaging social problems in the news

  ■ Seek out ownership of the social problems, so that claimsmakers are the presumptive

  people for the media to go to when covering the social problem

  ■ Offer typifying examples which can become landmark narratives, so synonymous with the

  social problem that they enter into the popular wisdom of the society

  ■ Create media-accessible packages for news workers to use

  ■ Package: familiar, hopefully coherent story (e.g., contains cause of the problem, villain,

  victim who has been greatly harmed, as well as proposed solution) that has a frame that

  is familiar to intended audience

  ■ Use condensing symbols which harken back to the social problem and are familiar to

  most in the society

  ■ Impact of the media on social problems process

  ■ Remember though, media are not the sole influence on the success or failure of a

  claimsmaking campaign

  ■ Media are frequently effective as agenda-setters, bringing an issue to public attention

  ■ Even here, there are constraints on media influence

  ■ Some events require coverage, no matter what other events might be on the agenda

  ■ Claimsmaking is covered when media feel the issue is newsworthy

  ■ Media constraints mean they must sift and sort through many claims to lift up only a

  few for public attention

  ■ The agenda-setting function, however, can be enormously influential on the social

  problems process, for both general public and policymakers may feel issues that make

  the media’s agenda are worthy of action

  ■ Media increasingly receive feedback from general and targeted audiences, especially with

  the availability of new technologies such as e-mail, and they often feel responsible to

  respond to it

  ■ Case study: Democratizing the Means of Media Production and Reproduction

Busi 530 Chapter 4 Solutions

Here is a simplified balance sheet for Caterpillar Tractor: Caterpillar Tractor Balance Sheet ($ in millions) Current assets $ 42,531 Current liabilities $ 29,748 Long­term assets 46,846 Long­term debt 27,759 Other liabilities 14,331 Equity 17,539 Total $ 89,377 Total $ 89,377 Caterpillar has 664 million shares outstanding with a market price of $90 a share. a. Calculate the company’s market value added. (Enter your answers in millions.) Market value $ 59,760 million Market value added $ 42,221 million b. Calculate the market­to­book ratio. (Round your answer to 2 decimal places.) Market­to­book ratio 3.41 c. Has the company created value for shareholders? Yes References Worksheet Learning Objective: 04­01 Calculate and interpret the market value and market value added of a public corporation. Here is a simplified balance sheet for Caterpillar Tractor: Caterpillar Tractor Balance Sheet ($ in millions) Current assets $ 42,531 Current liabilities $ 29,748 Long­term assets 46,846 Long­term debt 27,759 Other liabilities 14,331 Equity 17,539 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 3/20 Total $ 89,377 Total $ 89,377 Caterpillar has 664 million shares outstanding with a market price of $90 a share. a. Calculate the company’s market value added. (Enter your answers in millions.) Market value $ 59,760 ± 0.1% million Market value added $ 42,221 ± 0.1% million b. Calculate the market­to­book ratio. (Round your answer to 2 decimal places.) Market­to­book ratio 3.41 ± 1% c. Has the company created value for shareholders? Yes Explanation: a. Market value = 664 million × $90 = $59,760 million Market value added = $59,760 – 17,539 = $42,221 million b. Market value / Book value = $59,760 / $17,539 = 3.41 c. Yes. The company has increased the value of the equity investment by 341%. 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 4/20 2. Award: 2 out of 2.00 points Home Depot’s common stock closed fiscal 2012 at a price of $82.30 per share. There were 1,784 million shares outstanding, At the end of 2012, the book value of Home Depot’s equity was $17,792 million. Suppose the broad stock market falls 10% in a year and Home Depot’s stock price falls by 10%. a. Will the company’s market value added rise or fall? Fall b. Should this change affect our assessment of the performance of Home Depot’s managers? Yes c. Calculate the market value added, if the stock market were unchanged and Home Depot’s stock fell by 10%. (Enter your answer in millions. Round intermediate calculations and final answer to the nearest whole number.) Market value added $ 114,349 million rev: 02_03_2016_QC_CS­40565 References Worksheet Learning Objective: 04­01 Calculate and interpret the market value and market value added of a public corporation. Home Depot’s common stock closed fiscal 2012 at a price of $82.30 per share. There were 1,784 million shares outstanding, At the end of 2012, the book value of Home Depot’s equity was $17,792 million. Suppose the broad stock market falls 10% in a year and Home Depot’s stock price falls by 10%. a. Will the company’s market value added rise or fall? Fall b. Should this change affect our assessment of the performance of Home Depot’s managers? Yes c. Calculate the market value added, if the stock market were unchanged and Home Depot’s stock fell by 10%. (Enter your answer in millions. Round intermediate calculations and final answer to the nearest whole number.) Market value added $ 114,349 ± .1% million rev: 02_03_2016_QC_CS­40565 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 5/20 Explanation: Market value = 1,784 million × $82.30 = $146,823 million The market value added for Home Depot = $146,823 − 17,792 = $129,031 million Assuming the stock price drops 10%, the market value is now $146,823 × .90 = $132,141 Market value added = $132,141 – 17,792 = $114,349 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 6/20 3. Award: 2 out of 2.00 points Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales $ 884 Cost of goods sold 744 Depreciation 34 Earnings before interest and taxes (EBIT) $ 106 Interest expense 15 Income before tax $ 91 Taxes 31 Net income $ 60 BALANCE SHEET (Figures in $ millions) End of Year Start of Year Assets Current assets $ 372 $ 318 Long­term assets 264 225 Total assets $ 636 $ 543 Liabilities and shareholders’ equity Current liabilities $ 197 $ 160 Long­term debt 111 124 Shareholders’ equity 328 259 Total liabilities and shareholders’ equity $ 636 $ 543 The company’s cost of capital is 8.50%. a. Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Economic value added $ 37.35 million b. What is the company’s return on capital? (Use start­of­year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Return on capital 18.25 % c. What is its return on equity? (Use start­of­year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.) Return on equity 23.17 % d. Is the company creating value for its shareholders? Yes 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 7/20 References Worksheet Learning Objective: 04­02 Calculate and interpret key measures of financial performance, including economic value added (EVA) and rates of return on capital, assets, and equity. Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales $ 884 Cost of goods sold 744 Depreciation 34 Earnings before interest and taxes (EBIT) $ 106 Interest expense 15 Income before tax $ 91 Taxes 31 Net income $ 60 BALANCE SHEET (Figures in $ millions) End of Year Start of Year Assets Current assets $ 372 $ 318 Long­term assets 264 225 Total assets $ 636 $ 543 Liabilities and shareholders’ equity Current liabilities $ 197 $ 160 Long­term debt 111 124 Shareholders’ equity 328 259 Total liabilities and shareholders’ equity $ 636 $ 543 The company’s cost of capital is 8.50%. a. Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Economic value added $ 37.34 ± 1% million b. What is the company’s return on capital? (Use start­of­year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 8/20 Return on capital 18.25 ± 1% % c. What is its return on equity? (Use start­of­year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.) Return on equity 23.17 ± 1% % d. Is the company creating value for its shareholders? Yes Explanation: a. Economic value added = After­tax interest + Net income – (Cost of capital × Total capitalization) Economic value added = (1 – .34) × $15 + 60 – (.085 × [$259 + 124] = $37.34 b. Return on capital = (1 – .34) × $15 + 60 = .1825, or 18.25% $259 + 124 c. Return on equity = $60 = .2317, or 23.17% $259 d. Yes. The EVA indicates the firm is producing value in excess of the cost of capital. Thus, it is producing value. The ROC and ROE are also consistent with this conclusion. 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 9/20 4. Award: 2 out of 2.00 points At the end of 2011 Home Depot’s total capitalization amounted to $28,992 million. In 2012 debt investors received interest income of $635 million. Net income to shareholders was $4,526 million. (Assume a tax rate of 35%.) Calculate the economic value added assuming its cost of capital is 10%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Economic value added $ 2,039.55 million References Worksheet Learning Objective: 04­02 Calculate and interpret key measures of financial performance, including economic value added (EVA) and rates of return on capital, assets, and equity. At the end of 2011 Home Depot’s total capitalization amounted to $28,992 million. In 2012 debt investors received interest income of $635 million. Net income to shareholders was $4,526 million. (Assume a tax rate of 35%.) Calculate the economic value added assuming its cost of capital is 10%. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Economic value added $ 2,039.55 ± 0.1% million Explanation: Economic value added = After­tax interest + Net income – (Cost of capital × Total capitalization) Economic value added = (1 – .35) × $635 + 4,526 − (.10 × $28,992) = $2,039.55 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 10/20 5. Award: 2 out of 2.00 points Here are simplified financial statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in $ millions) Net sales $ 12,700 Cost of goods sold 3,810 Other expenses 4,112 Depreciation 2,368 Earnings before interest and taxes (EBIT) $ 2,410 Interest expense 660 Income before tax $ 1,750 Taxes (at 30%) 525 Net income $ 1,225 Dividends $ 826 BALANCE SHEET (Figures in $ millions) End of Year Start of Year Assets Cash and marketable securities $ 84 $ 153 Receivables 2,132 2,390 Inventories 162 213 Other current assets 842 907 Total current assets $ 3,220 $ 3,663 Net property, plant, and equipment 19,923 19,865 Other long­term assets 4,166 3,720 Total assets $ 27,309 $ 27,248 Liabilities and shareholders’ equity Payables $ 2,514 $ 2,990 Short­term debt 1,394 1,548 Other current liabilities 786 762 Total current liabilities $ 4,694 $ 5,300 Long­term debt and leases 8,263 7,728 Other long­term liabilities 6,128 6,099 Shareholders’ equity 8,224 8,121 Total liabilities and shareholders’ equity $ 27,309 $ 27,248 Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate calculations. Round your percentage answers “Return on equity”, “Return on assets”, Return on capital” and “Operating profit margin” to 2 decimal places and the rest to 2 decimal places.) 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 11/20 a. Return on equity (Use average equity.) 14.99 % b. Return on assets (Use after­tax operating income and average assets.) 6.18 % c. Return on capital (Use after­tax operating income and average capital.) 10.43 % d. Days in inventory (Use beginning inventory.) 20.41 days e. Inventory turnover (Use beginning inventory.) 17.89 f. Average collection period (Use beginning receivables.) 68.69 days g. Operating profit margin (Use after­tax operating income.) 13.28 % h. Long­term debt ratio (Use end of year values.) .50 i. Total debt ratio (Use end of year values.) .70 j. Times interest earned 3.65 k. Cash coverage ratio 7.24 l. Current ratio (Use end of year values.) .69 m. Quick ratio (Use end of year values.) .47 References Worksheet Learning Objective: 04­03 Calculate and interpret key measures of operating efficiency, leverage, and liquidity. Here are simplified financial statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in $ millions) Net sales $ 12,700 Cost of goods sold 3,810 Other expenses 4,112 Depreciation 2,368 Earnings before interest and taxes (EBIT) $ 2,410 Interest expense 660 Income before tax $ 1,750 Taxes (at 30%) 525 Net income $ 1,225 Dividends $ 826 BALANCE SHEET (Figures in $ millions) End of Year Start of Year 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 12/20 Assets Cash and marketable securities $ 84 $ 153 Receivables 2,132 2,390 Inventories 162 213 Other current assets 842 907 Total current assets $ 3,220 $ 3,663 Net property, plant, and equipment 19,923 19,865 Other long­term assets 4,166 3,720 Total assets $ 27,309 $ 27,248 Liabilities and shareholders’ equity Payables $ 2,514 $ 2,990 Short­term debt 1,394 1,548 Other current liabilities 786 762 Total current liabilities $ 4,694 $ 5,300 Long­term debt and leases 8,263 7,728 Other long­term liabilities 6,128 6,099 Shareholders’ equity 8,224 8,121 Total liabilities and shareholders’ equity $ 27,309 $ 27,248 Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate calculations. Round your percentage answers “Return on equity”, “Return on assets”, Return on capital” and “Operating profit margin” to 2 decimal places and the rest to 2 decimal places.) a. Return on equity (Use average equity.) 14.99 ± 1% % b. Return on assets (Use after­tax operating income and average assets.) 6.18 ± 1% % c. Return on capital (Use after­tax operating income and average capital.) 10.43 ± 1% % d. Days in inventory (Use beginning inventory.) 20.41 ± 1% days e. Inventory turnover (Use beginning inventory.) 17.89 ± 1% f. Average collection period (Use beginning receivables.) 68.69 ± 1% days g. Operating profit margin (Use after­tax operating income.) 13.28 ± 1% % h. Long­term debt ratio (Use end of year values.) .50 ± .01 i. Total debt ratio (Use end of year values.) .70 ± .01 j. Times interest earned 3.65 ± 1% k. Cash coverage ratio 7.24 ± 1% l. Current ratio (Use end of year values.) .69 ± .01 m. Quick ratio (Use end of year values.) .47 ± .01 Explanation: 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 13/20 a. Return on equity = $1,225 = .1499, or 14.99% ($8,224 + 8,121) / 2 b. Return on assets = $1,225 + 660 × (1 – .30) = .0618, or 6.18% ($27,309 + 27,248) / 2 c. Return on capital = $1,225 + 660 × (1 – .30) = .1043, or 10.43% [($8,263 + 8,224) + ($7,728 + 8,121)] / 2 d. Days in inventory = $213 = 20.41 days $3,810 / 365 e. Inventory turnover = $3,810 = 17.89 $213 f. Average collection period = $2,390 = 68.69 days $12,700 / 365 g. Operating profit margin = $1,225 + 660 × (1 – .30) = .1328, or 13.28% $12,700 h. Long­term debt ratio = $8,263 = .50 $8,263 + 8,224 i. Total debt ratio = $4,694 + 8,263 + 6,128 = .70 $27,309 j. Times interest earned = $2,410 = 3.65 $660 k. Cash coverage ratio = $2,410 + 2,368 = 7.24 $660 l. Current ratio = $3,220 = .69 $4,694 m. Quick ratio = $84 + 2,132 = .47 $4,694 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 14/20 6. Award: 2 out of 2.00 points Consider this simplified balance sheet for Geomorph Trading: Current assets $ 305 Current liabilities $ 250 Long­term assets 670 Long­term debt 195 Other liabilities 100 Equity 430 $ 975 $ 975 a. What is the company’s debt­equity ratio? (Round your answer to 2 decimal places.) Debt­equity ratio 1.28 b. What is the ratio of long­term debt to total long­term capital? (Round your answer to 2 decimal places.) Long­term debt ratio .31 c. What is its net working capital? Net working capital $ 55 d. What is its current ratio? (Round your answer to 2 decimal places.) Current ratio 1.22 References Worksheet Learning Objective: 04­03 Calculate and interpret key measures of operating efficiency, leverage, and liquidity. Consider this simplified balance sheet for Geomorph Trading: Current assets $ 305 Current liabilities $ 250 Long­term assets 670 Long­term debt 195 Other liabilities 100 Equity 430 $ 975 $ 975 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 15/20 a. What is the company’s debt­equity ratio? (Round your answer to 2 decimal places.) Debt­equity ratio 1.27 ± 1% b. What is the ratio of long­term debt to total long­term capital? (Round your answer to 2 decimal places.) Long­term debt ratio .31 ± .01 c. What is its net working capital? Net working capital $ 55 ± 1% d. What is its current ratio? (Round your answer to 2 decimal places.) Current ratio 1.22 ± 1% Explanation: a. Debt / Equity = $545 / $430 = 1.27 b. Total long­term debt / Total long­term capital = $195 / ($195 + 430) = .31 c. Net working capital = $305 – 250 = $55 d. Current ratio = $305 / $250 = 1.22 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 16/20 7. Award: 2 out of 2.00 points Lever Age pays a rate of interest of 10% on $10.2 million of outstanding debt with face value $10.2 million. The firm’s EBIT was $1.2 million. a. What is its times interest earned? (Round your answer to 2 decimal places.) Times interest earned 1.18 b. If depreciation is $220,000, what is its cash coverage? (Round your answer to 2 decimal places.) Cash coverage ratio 1.39 References Worksheet Learning Objective: 04­03 Calculate and interpret key measures of operating efficiency, leverage, and liquidity. Lever Age pays a rate of interest of 10% on $10.2 million of outstanding debt with face value $10.2 million. The firm’s EBIT was $1.2 million. a. What is its times interest earned? (Round your answer to 2 decimal places.) Times interest earned 1.18 ± 1% b. If depreciation is $220,000, what is its cash coverage? (Round your answer to 2 decimal places.) Cash coverage ratio 1.39 ± 1% Explanation: a. Interest expense = .10 × $10.2 million = $1,020,000 Times interest earned = $1,200,000 / $1,020,000 = 1.18 b. Cash coverage ratio = $1,200,000 + 220,000 = 1.39 $1,020,000 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 17/20 8. Award: 4 out of 4.00 points Long­term debt ratio 0.3 Times interest earned 10.0 Current ratio 1.6 Quick ratio 1.0 Cash ratio 0.3 Inventory turnover 3.0 Average collection period 73days Use the above information from the tables to work out the following missing entries, and then calculate the company’s return on equity. Note: Turnover and the average collection period are calculated using start­ofyear, not average, values. (Enter your answers in millions. Round intermediate calculations and final answers to 2 decimal places.) INCOME STATEMENT (Figures in $ millions) Net sales $ 210.00 Cost of goods sold 102.00 Selling, general, and administrative expenses 18.00 Depreciation 28.00 Earnings before interest and taxes (EBIT) $62.00 Interest expense 6.20 Income before tax $ 55.80 Tax (35% of income before tax) 19.53 Net income $ 36.27 BALANCE SHEET (Figures in $ millions) This Year Last Year Assets Cash and marketable securities $ 18.00 $ 28 Accounts receivable 42.00 42 Inventories 36.00 34 Total current assets $ 96.00 $ 104 Net property, plant, and equipment 104.00 33 Total assets $ 200.00 $137 Liabilities and shareholders’ equity Accounts payable $25.00 $ 20 Notes payable 35.00 40 Total current liabilities 60.00 60 Long­term debt 42.00 28 Shareholders’ equity 98.00 49 Total liabilities and shareholders’ equity $200.00 $137 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 18/20 References Worksheet Learning Objective: 04­03 Calculate and interpret key measures of operating efficiency, leverage, and liquidity. Long­term debt ratio 0.3 Times interest earned 10.0 Current ratio 1.6 Quick ratio 1.0 Cash ratio 0.3 Inventory turnover 3.0 Average collection period 73days Use the above information from the tables to work out the following missing entries, and then calculate the company’s return on equity. Note: Turnover and the average collection period are calculated using start­ofyear, not average, values. (Enter your answers in millions. Round intermediate calculations and final answers to 2 decimal places.) INCOME STATEMENT (Figures in $ millions) Net sales $ 210.00 ± 1% Cost of goods sold 102.00 ± 1% Selling, general, and administrative expenses 18.00 Depreciation 28.00 Earnings before interest and taxes (EBIT) $ 62.00 ± 1% Interest expense 6.20 ± 1% Income before tax $ 55.80 ± 1% Tax (35% of income before tax) 19.53 ± 1% Net income $ 36.27 ± 1% BALANCE SHEET (Figures in $ millions) This Year Last Year Assets Cash and marketable securities $ 18.00 ± 1% $ 28 Accounts receivable 42.00 ± 1% 42 Inventories 36.00 ± 1% 34 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 19/20 Total current assets $ 96.00 ± 1% $ 104 Net property, plant, and equipment 104.00 ± 1% 33 Total assets $ 200.00 ± 1% $137 Liabilities and shareholders’ equity Accounts payable $25.00 $ 20 Notes payable 35.00 40 Total current liabilities 60.00 ± 1% 60 Long­term debt 42.00 ± 1% 28 Shareholders’ equity 98.00 ± 1% 49 Total liabilities and shareholders’ equity $200.00 $137 Explanation: Total current liabilities = $25.00 + 35.00 = $60.00 Total current assets = $60 × 1.6 = $96.00 Cash = $60 × .3 = $18.00 Accounts receivable + Cash = $60.00 × 1.0 = $60.00 Accounts receivable = $60.00 – Cash = $60.00 – 18.00 = $42.00 Inventories = $96.00 – 18.00 – 42.00 = $36.00 Total assets = Total liabilities and shareholders’ equity = $200.00 Net property, plant, equipment = $200.00 – 96.00 = $104.00 Sales = (365 / Average collection period) × Beginning receivables = (365 / 73) × $42 = $210.00 Cost of goods sold = Inventory turnover × Beginning inventory = 3.0 × $34 = $102.00 EBIT = $210.00 – 102.00 – 18.00 – 28.00 = $62.00 Interest = EBIT / Times interest earned = $62 / $10.0 = $6.20 Income before tax = EBIT ­ Interest expense = $62.00 – 6.20 = $55.80 Tax = Income before tax × .35 = $55.80 × .35 = $19.53 Net income = Income before tax – Tax = $55.80 – 19.53 = $36.27 Long­term debt + Equity = Total liabilities and equity – Total current liablities = $200.00 – 60 = $140.00 Long­term debt ratio = .3 = Long­term debt / (Long­term debt + Equity) = Long­term debt / $140.00; LTD = $42.00 Shareholders’ equity = Total liabilities and equity – Total current liabilities ­ Long­term debt = $200.00 – 60.00 – 42.00 = $98.00 9/21/2016 Assignment Print View http://ezto.mheducation.com/hm_finance.tpx?todo=printview 20/20 9. Award: 2 out of 2.00 points In 2014 Electric Autos had sales of $120 million and assets at the start of the year of $190 million. If its return on start­of­year assets was 10%, what was its operating profit margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Operating profit margin 15.83 % References Worksheet Learning Objective: 04­04 Show how profitability depends on the efficient use of assets and on profits as a fraction of sales. In 2014 Electric Autos had sales of $120 million and assets at the start of the year of $190 million. If its return on start­of­year assets was 10%, what was its operating profit margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)