Comparative financial statement data of Danfield,
Inc., follow:
Danfield, Inc.
Comparative Income Statement
Years Ended December 31, 2012 and 2011
2015 2014
Net
sales
467,000
428,000
Cost of goods
sold 237,000 218,000
Gross
profit
230,000
210,000
Operating
expenses 136,000 134,000
Income from
operations
94,000
76,000
Interest
expense
9,000
10,000
Income before income
tax
85,000
66,000
Income tax
expense
24,000
27,000
Net
income
61,000
39,000
Danfield,
Inc.
Comparative
Balance Sheet
Years Ended December
31, 2012 and 2011
2015 2014 2013*
Current assets:
Cash
97,000 95,000
Current receivables, net
112,000 118,000
102,000
Inventories
145,000 163,000
203,000
Prepaid expenses 12,000 5,000
Total current assets
366,000 381,000
Property, plant, and equipment, net 211,000 179,000
Total assets
577,000 560,000
598,000
Total current liabilities
225,000 246,000
Long-term liabilities 114,000 97,000
Total liabilities
339,000 343,000
Preferred stock, 3%
108,000 108,000
Common stockholders' equity, no par 130,000 109,000
Total liabilities and stockholders'
equity 577,000
560,000
* Selected
2010 amounts
1. Market
price of Danfield's common stock: $86.58 at December 31, 2015 and $46.54 at
December 31, 2014.
2. Common
shares outstanding: 12,000 during 2015 and 10,000 during 2014 and 2013.
3. All sales
on credit.
Required:
A.
Compute the following ratios for 2015 and 2014:
1.
Current ratio
2. Cash
ratio
3.
Times-interest-earned ratio 4. Inventory turnover 5. Gross profit
percentage 6. Debt to equity ratio
7. Rate
of return on common stockholders' equity
8.
Earnings per share of common stock
9.
Price/earnings ratio
B.
Decide (a) whether Danfield’s ability to pay debts and to sell inventory
improved or deteriorated during 2015 and (b) whether the investment
attractiveness of its common stock appears to have increased or decreased
TUTORIAL PREVIEW
Req. 1
|
Ratio
|
Formula
|
2015
|
2014
|
|
|
(Dollar
Amounts and Stock Quantities in Thousands)
|
||||
|
1.
|
Current Ratio
|
Current Assets/ Current Liabilities
|
$366/ $225
= 1.63
|
$381/ $246
= 1.55
|
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