Comparative financial statement data of Old Tyme Candies Corp. appear below:

Other information:

• Market price of Old Tyme Candies Corp. common shares: $24.00 at December 31, 2020, and $12.00 at December 31, 2019.

• Common shares outstanding: 10,000 during 2020 and 7,500 during 2019.

• There are 1,000 preferred shares outstanding at December 31, 2020 and 2019. Preferred dividends were declared each year.

• All sales are on credit.

Required

1. Compute the following ratios for 2020 and 2019, rounding all answers to two decimal places:

a. Current ratio

b. Inventory turnover

c. Accounts receivable turnover

d. Debt/equity ratio

e. Times-interest-earned ratio

f. Return on assets

g. Return on common shareholders’ equity

h. Earnings per common share

i. Price–earnings ratio

j. Book value per common share at year-end

2. Decide 

(a) Whether Old Tyme Candies Corp.’s financial position improved or deteriorated during 2020, 

(b) Whether the investment attractiveness of its common shares appears to have increased or decreased.

Transcribed Image Text:

OLD TYME CANDIES CORP. Income Statement For the Years Ended December 31, 2020 and 2019 2020 2019 Net sales $311,850 $297,000 Cost of goods sold Gross margin 148,850 147,000 163,000 150,000 Operating expenses 79,250 77,000 Income from operations 83,750 73,000 Interest expense 12,500 14,000 Income before income tax 71,250 59,000 Income tax expense 17,850 14,600 Net income $ 53,400 $ 44,400