Matthias Medical manufactures hospital beds and other institutional furniture. T
ID: 2470799 • Letter: M
Question
Matthias Medical manufactures hospital beds and other institutional furniture. The company’s comparative balance sheet and income statement for 2012 and 2013 follow.
Matthias Medical
Comparative Balance Sheet
As of December 31
2013
2012
Assets
Current assets
Cash
$333,000
$417,500
Accounts receivable, net
1,066,900
776,450
Inventory
738,000
681,100
Other current assets
393,000
247,050
Total current assets
2,530,900
2,122,100
Property, plant, & equipment, net
9,093,850
8,406,875
Total assets
$11,624,750
$10,528,975
Liabilities and Stockholders’ Equity
Current liabilities
$3,166,000
$2,846,000
Long-term debt
3,702,650
3,892,700
Total liabilities
6,868,650
6,738,700
Preferred stock, $5 par value
59,300
59,300
Common stock, $0.25 par value
122,000
103,850
Retained earnings
4,574,800
3,627,125
Total stockholders’ equity
4,756,100
3,790,275
Total liabilities and stockholders’ equity
$11,624,750
$10,528,975
Matthias Medical
Comparative Income Statement and Statement of Retained Earnings
For the Year
2013
2012
Sales revenue (all on account)
$10,730,000
$9,613,900
Cost of goods sold
5,563,000
5,298,750
Gross profit
5,167,000
4,315,150
Operating expenses
2,840,250
2,634,200
Net operating income
2,326,750
1,680,950
Interest expense
318,000
308,700
Net income before taxes
2,008,750
1,372,250
Income taxes (30%)
602,625
411,675
Net income
$1,406,125
$960,575
Dividends paid
Preferred dividends
29,450
29,450
Common dividends
429,000
469,000
Total dividends paid
458,450
498,450
Net income retained
947,675
462,125
Retained earnings, beginning of year
3,627,125
3,165,000
Retained earnings, end of year
$4,574,800
$3,627,125
Calculate the following profitability ratios for 2013. (Round answers to 1 decimal place, e.g. 50.1%.)
a.
Gross margin percentage
%
b.
Return on assets
%
c.
Return on common stockholders’ equity
%
Matthias Medical
Comparative Balance Sheet
As of December 31
2013
2012
Assets
Current assets
Cash
$333,000
$417,500
Accounts receivable, net
1,066,900
776,450
Inventory
738,000
681,100
Other current assets
393,000
247,050
Total current assets
2,530,900
2,122,100
Property, plant, & equipment, net
9,093,850
8,406,875
Total assets
$11,624,750
$10,528,975
Liabilities and Stockholders’ Equity
Current liabilities
$3,166,000
$2,846,000
Long-term debt
3,702,650
3,892,700
Total liabilities
6,868,650
6,738,700
Preferred stock, $5 par value
59,300
59,300
Common stock, $0.25 par value
122,000
103,850
Retained earnings
4,574,800
3,627,125
Total stockholders’ equity
4,756,100
3,790,275
Total liabilities and stockholders’ equity
$11,624,750
$10,528,975
Explanation / Answer
a Gross Margin Percentage = Gross Margin*100/ Sales 5167000*100/10730000 48.15471 Gross Margin Percentage = 48.15% b Return on Assets = Net Income / Average Assets Average Assets = (11624750+10528975)/2 11076863 Return on Assets = 1406125/11076863 0.126943 Return on assets is 12.69% c Return on common stockholders Equity Net Income- Preferrence dividend/ Average common stockholders equity 1406125-29450/(122000+103850)/2 1376675/112925 12.19106 Return on common stockholders Equity 12.19%