Comparative financial statement data of Dunn's Brass Foundry follow.

Other information:

a. Market price of Dunn's common stock: \(\$ 30.75\) at December 31, 19X6, and \(\$ 40.25\) at December 31, 19X5.

b. Common shares outstanding: 15,000 during 19X6 and 14,000 during 19X5.

c. All sales on credit.
\section*{Required}
1. Compute the following ratios for 19X6 and 19X5:

a. Current ratio

b. Inventory turnover

c. Accounts receivable turnover

d. Times-interest-earned ratio

e. Return on assets

f. Return on common stockholders' equity g. Earnings per share of common stock h. Price/earnings ratio i. Book value per share of common stock 2. Decide whether

(a) Dunn's financial position improved or deteriorated during 19X6 and

(b) the investment attractiveness of its common stock appears to have increased or decreased.
3. How will what you learned in this problem help you evaluate an investment?
Using ratios to decide between two stock investments (Obj. 5, 6)

Transcribed Image Text:

DUNN'S BRASS FOUNDRY COMPARATIVE INCOME STATEMENT YEARS ENDED DECEMBER 31, 19X6 AND 19X5 Net sales. Cost of goods sold. Gross profit........ Operating expenses Income from operations.. Interest expense Income before income tax. Income tax expense... Net income. 19X6 19X5 $667,000 $599,000 378,000 283,000 289,000 316,000 129,000 147,000 160,000 169,000 57,000 41,000 103,000 128,000 34,000 53,000 $ 69,000 $ 75,000