The condensed balance sheet and income statement data for Whitcomb Corporation are presented on page 696.

2006

$624,000 405,600 218,400 149,760 68,640 7,200 61,440 14,000

$ 47,440 2006

$ 21,600 33,000 93,800 64,000 212,400 439,600

$652,000

$132,000 24,000 156,000 120,000 276,000 130,000 246,000 376,000

$652,000

(h) Days in inventory.

(i) Times interest earned.

(j) Asset turnover.

(k) Debt to total assets.

(1) Current cash debt coverage.

(m) Cash debt coverage.

(n) Free cash flow, Problems: Set B 695 Perform ratio analysis, and discuss change in financial position and operating results.

(SO 6)

696 CHAPTER 13 Financial Analysis: The Big Picture WHITCOMB CORPORATION Balance Sheets December 31 _ 2007 _ _2006 _ _ 2005 __ Cash $ 30,000 $ 24,000 $ 20,000 Receivables (net) 110,000 48,000 48,000 Other current assets 80,000 78,000 62,000 Investments 90,000 70,000 50,000 Plant and equipment (net) 603,000 400,000 360,000

$913,000 $620,000 $540,000 Current liabilities $ 98,000 $ 75,000 $ 70,000 Long-term debt 230,000 75,000 65,000 Common stock, $10 par 400,000 340,000 300,000 Retained earnings 185,000 130,000 105,000

$913,000 $620,000 $540,000 WHITCOMB CORPORATION Income Statements For the Years Ended December 31 _ 2007 _ _2 006_ Sales $800,000 $750,000 Less: Sales returns and allowances __ 40,000 __ 50,000 Net sales 760,000 700,000 Cost of goods sold 420,000 400,000 Gross profit 340,000 300,000 Operating expenses (including income taxes) 200,000 215,000 Net income $140,000 $ 85,000 Additional information: 1. The market price of Whitcomb common stock was $5.00, $3.50, and $2.30 for 2005, 2006, and 2007, respectively. 2. You must compute dividends paid. All dividends were paid in cash.

Instructions

(a) Compute the following ratios for 2006 and 2007.

(1) Profit margin. (5) Price-earnings.

(2) Gross profit rate. (6) Payout.

(3) Asset turnover. (7) Debt to total assets.

(4) Earnings per share.

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

Compute ratios; comment on overall liquidity and