Condensed balance sheet and income statement data for Swann Corporation are Compute and interpret presented below. liquidity, solvency, and SWANN CORPORATION profitability ratios.

(SOo2 5A 5)

Balance Sheets ie December 31 a Cpa Assets 2007 2006 Cash $ 40,000 $ 24,000 Receivables (net) 90,000 55,000 Other current assets 74,000 73,000 Long-term investments 78,000 70,000 Plant and equipment (net) 525,000 427,000 Total assets $807,000 $649,000 Liabilities and Stockholders’ Equity 2007 2006 Current liabilities $ 98,000 $ 75,000 Long-term debt 90,000 70,000 Common stock 370,000 340,000 Retained earnings 249,000 164,000 Total liabilities and stockholders’ equity $807,000 $649,000 SWANN CORPORATION Income Statements For the Years Ended December 31 2007 2006 Sales $760,000 $800,000 Cost of goods sold 420,000 400,000 Operating expenses (including income taxes) 200,000 237,000 Net income $140,000 $163,000 92 CHAPTER 2. A Further Look at Financial Statements Additional information:

Cash from operating activities $165,000 $178,000 Capital expenditures $ 85,000 $ 45,000 Dividends paid $ 15,000 $ 13,000 Average number of shares outstanding 370,000 320,000 Instructions Compute the following 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 the financial position and operating results of Swann from 2006 to 2007.

Compute ratios and compare 2-7B_ Selected financial data of two competitors, Blockbuster Inc. and Hollywood Enliquidity, solvency, and prof- _ tertainment Corp., in 2004 are presented here. (All dollars are in millions.)

itability for two companies.

SO’ 2,4,.5) Hollywood Guz Blockbuster Inc. Entertainment Corp.

Income Statement Data for Year Net sales $ 6,053 $1,782 Cost of goods sold 2,441 717 Selling and administrative expenses Rl 917 Interest expense 38 30 Other expense 1,749 2 Income tax expense (refund) (37) 45 Net income $(1,249) oak Hollywood Blockbuster Inc. Entertainment Corp.

Balance Sheet Data (End of Year)

Current assets $1,218 $ 403 Property, plant, and equipment (net) 854 228 Intangible assets 1,630 69 Other assets 161 420 Total assets $3,863 . $1,120 Current liabilities $1,424 % ool Long-term debt L376 395 Total stockholders’ equity 1,063 374 Total liabilities and stockholders’ equity $3,863 $1,120 Average shares outstanding 180.9 60.5 Cash from operating activities SUNS $401 Cash used for capital expenditures $289 $272 Dividends paid $920 $—0-

Instructions For each company, compute these values and ratios.

(a) Working capital.

(b) Current ratio. (Round to two decimal places.)

(c) Debt to total assets ratio.

(d) Free cash flow.

(e) Earnings per share.

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(f) Compare the liquidity, profitability, and solvency of the two companies.

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