60.1K

Verified Solution

Link Copied!

Problem 13-23A Ratio analysis LO 13-2, 13-3, 13-4, 13-5

The following financial statements apply to Adams Company:

	Year 4				Year 3
Revenues
Net sales	$	211,300			$	176,500
Other revenues		9,400				6,800
Total revenues		220,700				183,300
Expenses
Cost of goods sold		125,000				101,000
Selling expenses		19,700				17,700
General and administrative expenses		10,900				9,900
Interest expense		2,000				2,000
Income tax expense		19,600				16,100
Total expenses		177,200				146,700
Net income	$	43,500			$	36,600
Assets
Current assets
Cash	$	5,500			$	7,200
Marketable securities		1,900				1,900
Accounts receivable		35,200				31,700
Inventories		101,100				95,900
Prepaid expenses		4,700				3,700
Total current assets		148,400				140,400
Plant and equipment (net)		106,200				106,200
Intangibles		21,100				0
Total assets	$	275,700			$	246,600
Liabilities and Stockholders Equity
Liabilities
Current liabilities
Accounts payable	$	40,000			$	54,900
Other		15,900				15,200
Total current liabilities		55,900				70,100
Bonds payable		64,200				65,200
Total liabilities		120,100				135,300
Stockholders equity
Common stock (48,000 shares)		115,000				115,000
Retained earnings		40,600				(3,700	)
Total stockholders equity		155,600				111,300
Total liabilities and stockholders equity	$	275,700			$	246,600

Required Calculate the following ratios for Year 3 and Year 4. Since Year 2 numbers are not presented do not use averages when calculating the ratios for Year 3. Instead, use the number presented on the Year 3 balance sheet. a. Net margin. (Round your answers to 2 decimal places.) b. Return on investment. (Round your answers to 2 decimal places.) c. Return on equity. (Round your answers to 2 decimal places.) d. Earnings per share. (Round your answers to 2 decimal places.) e. Price-earnings ratio (market prices at the end of Year 3 and Year 4 were $6.08 and $4.80, respectively). (Round your intermediate calculations and final answers to 2 decimal places.) f. Book value per share of common stock. (Round your answers to 2 decimal places.) g. Times interest earned. Exclude extraordinary income in the calculation as they cannot be expected to recur and, therefore, will not be available to satisfy future interest payments. (Round your answers to 2 decimal places.) h. Working capital. i. Current ratio. (Round your answers to 2 decimal places.) j. Quick (acid-test) ratio. (Round your answers to 2 decimal places.) k. Accounts receivable turnover. (Round your answers to 2 decimal places.) l. Inventory turnover. (Round your answers to 2 decimal places.) m. Debt-to-equity ratio. (Round your answers to 2 decimal places.) n. Debt-to-assets ratio. (Round your answers to the nearest whole percent.)

	Year 4 Year 3 a. Net margin % % b. Return on investment % % c. Return on equity % % d. Earnings per share e. Price-earnings ratio times times f. Book value g. Interest earned times times h. Working capital i. Current ratio j. Quick (acid-test) ratio k. Accounts receivable turnover times times l. Inventory turnover times times m. Debt-to-equity ratio n. Debt-to-assets ratio % %

Answer & Explanation Solved by verified expert

See Answer