Answer:
(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
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
