the king mattress company had the following operating results for 2018-2019. in addition, the company paid dividends in both 2018 and 2019 of $66,600 per year and made capital expenditures in both years of $30,000 per year. the company's stock price in 2018 was $8 and $7 in 2019. the industry average earnings multiple for the mattress industry was 9 in 2019 and the free cash flow and sales multiples were 18 and 1.5, respectively. the company is publicly owned and has 1,400,000 shares of outstanding stock at the end of 2019. Balance Sheet, Dec 31, $ $ $ $ $ $ $ $ Cash Accounts Receivable Inventory Total Current Assets Long-lived Assets Total Assets Current Liabilities Long-term Debt Shareholder Equity Total Debt and Equity 2019 340,000 350,000 250.000 940,000 1,080.000 2,020,000 200,000 600,000 1.220.000 2,020,000 2018 100,000 400,000 300,000 800,000 1.100.000 1,900,000 300,000 500,000 1.100.000 1,900,000 $ $ $ $ $ $ $ Sales Cost of Sales Gross Margin Operating Expenses Operating Income Taxes Net Income Income Statement, for year ended Dec 31, 2019 $ 4,750,000 4,100,000 650,000 350,000 300,000 120,000 S 180,000 2018 4,500,000 4,000,000 500,000 400.000 100.000 40,000 60,000 $ $ $ Cash Flow From Operations Net Income Plus Depreciation Expense + Decrease (-inc) in AccRec. and Inv. + Increase (-dec) in Cur. Liabl. Cash Flow from Operations 2019 180,000 50,000 100,000 (100,000) 230,000 2018 60,000 50,000 $ $ 110,000 i) The accounts receivable turnover ratio for 2019 is (rounded): Ans: $4,750,000/[($350,000 + 400,000)/2] = 12.7 ii) The inventory turnover ratio for 2019 is (rounded): Ans: $4,100,000/[($300,000 + 250,000)/2] = 14.9 iii) The current ratio for 2019 is: Ans: $940,000/$200,000 = 4.7 iv) The gross margin percentage for 2019 is (rounded): Ans: $650,000/$4,750,000 = 13.7% v) Return on assets for 2019 is (rounded): Ans:$180,000/[($2,020,000 + 1,900,000)/2] = 9.2% vi) Return on equity for 2019 is (rounded): Ans: $180,000/[($1,220,000 + 1,100,000)/2] = 15.5% vii) The value of the company, calculated using the earnings multiple for 2019 is: Ans: 9 * $180,000 = $1,620,000
