Condensed balance sheet and income statement data for Kersenbrock Corporation appear below.

Additional information:

1. The market price of Kersenbrock’s common stock was $4.00, $5.00, and $8.00 for 2009, 2010, and 2011, respectively.

2. All dividends were paid in cash.

Instructions

(a) Compute the following ratios for 2010 and 2011.

(1) Profit margin.

(2) Asset turnover.

(3) Earnings per share. (Weighted average common shares in 2011 were 32,000 and in 2010 were 31,000.)

(4) Price-earnings.

(5) Payout.

(6) Debt to total assets.

(b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2010 to 2011 of Kersenbrock Corporation.

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KERSENBROCK CORPORATION Balance Sheets December 31 2011 2010 2009 $ 25,000 50,000 90,000 75,000 400,000 $ 20,000 45,000 $ 18,000 48,000 Cash Receivables (net) Other current assets 95,000 64,000 45,000 358,000 Investments 70,000 Plant and equipment (net) 370,000 $640,000 $600,000 $533,000 $ 75,000 80,000 340,000 145,000 $ 80,000 85,000 $ 70,000 Current liabilities Long-term debt Common stock, $10 par Retained earnings 50,000 310,000 300,000 113,000 125,000 $600,000 $640,000 $533,000 KERSENBROCK CORPORATION Income Statement For the Year Ended December 31 2011 2010 $740,000 40,000 $700,000 50,000 Sales Less: Sales returns and allowances Net sales 700,000 420,000 650,000 400,000 Cost of goods sold Gross profit Operating expenses (including income taxes) 280,000 250,000 220,000 235,000 $ 45,000 $ 30,000 Net income