All balance sheet data are as of December 31, 2007.

$ 1,800 34,000 36,000 2,100 8,600 10,200 5,300 7,500 2,000 5,900 4,300 14,000 3,600 58,000 2,900 1,200

$ 2,400 4,150 6,600 2,200 21,935 20,000 2,800 23,050 14,450 1,100 300 350 175 5,700 380 760 13,960 6,840 Further Look at Financial Statements Oscar Company Felix Company 2007 _2007 Net sales $450,000 $918,000 Cost of goods sold 260,000 620,000 Operating expenses 134,000 55,000 Interest expense 6,000 10,000 Income tax expense 10,000 65,000 Current assets 180,000 700,000 Plant assets (net) 600,000 800,000 Current liabilities 60,000 250,000 Long-term liabilities 190,000 200,000 Additional information:
Cash from operating activities $ 26,000 $180,000 Capital expenditures $ 20,000 $ 50,000 Dividends paid $ 4,000 $ 15,000 Average number of shares 200,000 400,000 outstanding Instructions

(a) Comment on the relative profitability of the companies by computing the net income and earnings per share for each company for 2007.

(b) Comment on the relative liquidity of the companies by computing working capital and the current ratios for each company for 2007.

(c) Comment on the relative solvency of the companies by computing the debt to total assets ratio and the free cash flow for each company for 2007.
Compute and interpret P2-5B_ The financial statements of Jackson Company are presented here.
liquidity, solvency, and profitability ratios.
Oai ) JACKSON COMPANY Gaze Income Statement For the Year Ended December 31 _2 007 Net sales $700,000 Cost of goods sold 400,000 Selling and administrative expenses 150,000 Interest expense 7,800 Income tax expense 43,000 Net income $ 99,200 JACKSON COMPANY Balance Sheet December 31 Assets 2007 Current assets Cash $ 23,100 Short-term investments 34,800 Accounts receivable (net) 106,200 Inventory 155,000 Total current assets 319,100 Plant assets (net) 465,300 Total assets $784,400 Problems: Set B 91 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $120,200 Income taxes payable 24,000 Total current liabilities 144,200 Bonds payable 130,000 Total liabilities 274,200 Stockholders’ equity Common stock 170,000 Retained earnings 340,200 Total stockholders’ equity 510,200 Total liabilities and stockholders’ equity $784,400 Cash from operating activities $ 71,300 Capital expenditures $ 42,000 Dividends paid $ 10,000 Average number of shares outstanding 70,000 Instructions

(a) Compute the following values and ratios for 2007. (We have provided the results from 2006 for comparative purposes.)
(i) Current ratio. (2006: 2.4:1)
(ii) Working capital. (2006: $178,000)
(iii) Debt to total assets ratio. (2006: 31%)
(iv) Free cash flow. (2006: $13,000)
(v) Earnings per share. (2006: $1.35)

(b) Using your calculations from part (a), discuss changes from 2006 in liquidity, solvency, and profitability.