Ratio analysis over two years (Learning Objective 4)

Comparative financial statement data of Weinstein, Inc., follow.

1. Market price of Weinstein’s common stock: $49.00 at December 31, 2009, and $32.50 at December 31, 2008 2. Common shares outstanding: 10,000 during 2009 and 9,000 during 2008 3. All sales on credit Requirements 1. Compute the following ratios for 2009 and 2008:

a. Current ratio

b. Times-interest-earned ratio

c. Inventory turnover

d. Return on common stockholders’ equity

e. Earnings per share of common stock

f. Price/earnings ratio 2. Decide

(a) whether Weinstein’s ability to pay debts and to sell inventory improved or deteriorated during 2009 and

(b) whether the investment attrac¬ tiveness of its common stock appears to have increased or decreased.

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WEINSTEIN, INC. Comparative Income Statement Years Ended December 31, 2009 and 2008 2009 2008 Net sales Cost of goods sold Gross profit Operating expenses Income from operations Interest expense Income before income tax Income tax expense Net income $462,000 $427,000 240,000 218,000 222,000 209,000 136,000. 134,000 86,000 75,000 11,000 12,000 75,000 63,000 25,000 27,000 $ 50,000 $36,000 WEINSTEIN, INC. Comparative Balance Sheet December 31, 2009 and 2008 2009 2008 2007 Current assets: Cash $ 96,000 $97,000 Current receivables, net 112,000 116,000 $103,000 Inventories Prepaid expenses Total current assets Property, plant, and equipment, net Total assets Total current liabilities 214,000 178,000 $585,000 $560,000 598,000 $226,000 $243,000 147,000 162,000 207,000 16,000 7,000 371,000 382,000 Long-term liabilities Total liabilities 119,000 97,000 345,000 340,000 100,000 100,000 Preferred stock, 6% Common stockholders' equity, no par Total liabilities and stockholders' equity Selected 2007 amounts 140,000 120,000 $585,000 $560,000 90,000