E15-18
P15-26A Financial Statement Analysis
Financial Statement Analysis
From
Chapter 15, complete E15-18 and P15-26A and post the answers to the discussion
board by day 3. Respond to at least two of your classmates’ postings.
E15-18
Large
Land Photo Shop has asked you to determine whether the company’s ability to pay
current liabilities and total liabilities improved or deteriorated during 2012.
To answer this question, you gather the following data:
|
|
2012
|
2011
|
|
Cash
|
$58,000
|
$57,000
|
|
Short-term
investments
|
31,000
|
|
|
Net
receivables
|
110,000
|
132,000
|
|
Inventory
|
247,000
|
297,000
|
|
Total
assets
|
585,000
|
535,000
|
|
Total
current liabilities
|
255,000
|
222,000
|
|
Long-term
note payable
|
46,000
|
48,000
|
|
Income
from operations
|
180,000
|
153,000
|
|
Interest
expense
|
52,000
|
39,000
|
1.
Compute the following ratios for 2012 and 2011:
a.
Current ratio
b.
Acid-test ratio
c.
Debt to equity ratio
P15-26A
Using ratios to evaluate a stock investment
Comparative
financial statement data of Danfield, Inc., follow:
|
Danfield, Inc.
|
|||
|
Comparative Income Statement
|
|||
|
Years Ended December 31, 2012 and 2011
|
|||
|
|
2012
|
2011
|
|
|
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 Income Statement
|
|||
|
Years Ended December 31, 2012 and 2011
|
|||
|
|
2012
|
2011
|
2010*
|
|
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, 2012 and $46.54
at December 31, 2011.
2.
Common shares outstanding: 12,000 during 2012 and 10,000 during 2011 and 2010.
3.
All sales on credit.
Requirements
1.
Compute the following ratios for 2012 and 2011:
a.
Current ratio
b.
Times-interest-earned ratio
c.
Inventory turnover
d.
Gross profit percentage
e.
Debt to equity ratio
f.
Rate of return on common stockholders’ equity
g.
Earnings per share of common stock
h.
Price/earnings ratio
2.
Decide (a) whether Danfield’s ability to pay debts and sell inventory improved
or deteriorated during 2012 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
|
File name: E15-18 P15-26A
Financial Statement Analysis.docx File type: .docx PRICE: 12
