Condensed balance sheet and income statement data for Mere Corporation are liquidity, solvency, and presented here.

profitability ratios.

(SO 2, 4, 5) MERE CORPORATION

=e Balance Sheets December 31 Assets _2007 _ __2006_ Cash $ 25,000 $ 20,000 Receivables (net) 70,000 62,000 Other current assets 80,000 73,000 Long-term investments 75,000 60,000 Plant and equipment (net) 510,000 470,000 Total assets $760,000 $685,000 Liabilities and Stockholders’ Equity 2007 2006 Current liabilities $ 85,000 $ 70,000 Long-term debt 80,000 90,000 Common stock 320,000 300,000 Retained earnings 275,000 225,000 Total liabilities and stockholders’ equity $760,000 $685,000 Problems: Set A 87 MERE CORPORATION Income Statements For the Years Ended December 31 2007 2006 Sales $750,000 $670,000 Cost of goods sold 440,000 400,000 Operating expenses (including income taxes) 240,000 220,000 Net income $ 70,000 $ 50,000 Additional information:

Cash from operating activities $87,000 $60,000 Cash used for capital expenditures $45,000 $38,000 Dividends paid $20,000 $15,000 Average number of shares outstanding 32,000 30,000 Instructions Compute these values and ratios for 2006 and 2007.

(a) Earnings per share.

(b) Working capital.

(c) Current ratio.

(d) Debt to total assets ratio.

(e) Free cash flow.

(f) Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2006 to 2007 of Mere Corporation.