CP13-2 Analyzing Comparative Financial Statements Using Selected RatIos L0 13-4,
ID: 2412678 • Letter: C
Question
CP13-2 Analyzing Comparative Financial Statements Using Selected RatIos L0 13-4, L0 13-5 The comparative financial statements prepared at December 31 for Golden Corporation showed the following summarized data Current Previous Income Statement Sales revenue Cost of goods sold $210,000 $189,000 112,000 122,000 Gross profit Operating expenses Interest expense 88,000 59,300 3,300 77,000 55,200 3,200 Income before income taxes Income tax expense 25,400 7,620 18,600 3,600 Net income $17,780 $15,000 Balance Sheet Cash Accounts receivable (net) Inventory Property and equipment (net) $ 4,680 25,000 46,000 51,000 8,600 26,000 41,000 44,000 $126,680 $119,600 Current liabilities Note payable (long-term) Common stock (par $5) Additional paid-in capital Retained earnings* $15,500 23,200 51,000 33,600 5,600 6,200 51,000 33,600 6,200 20,380 $126,680 $119,600 *During the current vear, cash dividends of $3,600 were declared and paidExplanation / Answer
Solution:
5-a
Fixed Asset Turnover
Current Year
Previous Year
Sales (A)
$210,000
$189,000
Average Fixed Assets
Beginning Balance
$44,000
$38,000
Ending Balance
$51,000
$44,000
Average Fixed Assets (beg + End)/2 (B)
$47,500
$41,000
Fixed Asset Turnover (A/B)
4.42
4.61
5-b
Current Year Result --- WORSE
6-a
Debt to Assets Ratio
Current Year
Previous Year
Total Debt (Current Liablities + Notes Payable) (A)
$66,500
$74,200
Total Asset (B)
$126,680
$119,600
Debt To Assets Ratio (A/B)
0.52
0.62
`6-b
Answer is correct
7-a)
Times Interest Earned Ratio
Earnings Before Interest and Taxes (gross profit - operating expenses)
$28,700
(88,000 – 59,300)
$21,800
(77,000 – 55,200)
Interest Expense
$3,300
$3,200
Times Interest Earned Ratio (Earnings Before Interest and Taxes / Interest Expense)
8.70
6.81
Times
Times
8-a
8-a
Price /Earnings Ratio
Current Year
Previous Year
Market Price Per Share (A)
$36
$27
Earnings per Share (B)
Net Income attributable to Equity Stockholders'
$17,780
$15,000
Number of Common Stock Outstanding (Common Stock Value $33,600 /Par Value 5)
6720
6720
Earnings Per Share (B) (Net Income / Number of Common Stock)
$2.65
$2.23
Price / Earnings Ratio (Marking Price Per Share /Earnings Per Share)
13.61
12.10
Times
Times
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5-a
Fixed Asset Turnover
Current Year
Previous Year
Sales (A)
$210,000
$189,000
Average Fixed Assets
Beginning Balance
$44,000
$38,000
Ending Balance
$51,000
$44,000
Average Fixed Assets (beg + End)/2 (B)
$47,500
$41,000
Fixed Asset Turnover (A/B)
4.42
4.61
5-b
Current Year Result --- WORSE
6-a
Debt to Assets Ratio
Current Year
Previous Year
Total Debt (Current Liablities + Notes Payable) (A)
$66,500
$74,200
Total Asset (B)
$126,680
$119,600
Debt To Assets Ratio (A/B)
0.52
0.62
`6-b
Answer is correct
7-a)
Times Interest Earned Ratio
Earnings Before Interest and Taxes (gross profit - operating expenses)
$28,700
(88,000 – 59,300)
$21,800
(77,000 – 55,200)
Interest Expense
$3,300
$3,200
Times Interest Earned Ratio (Earnings Before Interest and Taxes / Interest Expense)
8.70
6.81
Times
Times