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 Online tuition and basic understanding
02-16-2011, 08:48 PM
Post: #1
 dooshdonkey Junior Member Posts: 1 Joined: Feb 2011 Reputation: 0
Online tuition and basic understanding
I am currently at uni doing a diploma in Events Management which includes an Accountancy course. I have almost zero understanding of it. This was a couple of the questions in my mock paper.

Question 1.

Chris Limited has current assets of \$200,000 and current liabilities of \$100,000. If the company uses \$20,000 cash to pay accounts payable, it's current ratio would

a. increase
b. decrease
c. remain the same
d. not be affected

Question 2.

In the year 2000 KMB company Reported an EPS of \$3.00, and at the time the shares sold at a P/E multiplier of 9

In the year 2001 the company reported an EPS of \$3.50 and shares had a P/E multiplier of 12

By how much did the share market price increase in the year 2001?

a. \$4.50
b. \$6.00
c. \$9.00
d. \$15.00

can anyone answer this question and please explain in language ( or a sum) that anyone can understand?

Much appreciated.
02-17-2011, 02:41 AM
Post: #2
 HUMA12 Junior Member Posts: 1 Joined: Nov 2010 Reputation: 0

The current ratio would increase in such case.

Current ratio= current assets/current liabilities

Before payment
Current ratio =2

After payment
Current ratio =2.25

there would be an increase of Rs.15 per share.

Price per share =P/E multipler* EPS

In 2000
Price per share=9*3=27

In 2001
Price per share=3.5*12=42

Net increase= 42-27 =15

please write back if any queries
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