1 Profitability Ratios Financial statements for Steele Inc. follow 2017 $6,149,218 (4,355,675) $1,793,543 (1,080,843) Steele Inc. Consolidated Income Statements (in thousands except per share amounts) 2019 2018 Net sales $7,245,088 $6,944,296 Cost of goods sold (5,286,253) (4,953,556) Gross margin $1,958,835 $1,990,740 General and administrative expenses (1,259,896) (1,202,042) Special and nonrecurring items 2,617 Operating income $701,556 $788,698 Interest expense (63,685) (62,398) Other income 7,308 10,080 9,117 Gain on sale of investments $645,179 $745,497 Income before income taxes (254,000) (290,000) Provision for income taxes $391,179 $455,497 Net income $712,700 (63,927) 11,529 $660,302 (257,000) $403 302 ene consolidated Balance Sheets (in thousands) Dec 31, 2019 Dec 31, 2018 ASSETS Current assets: Cash and equivalents Accounts receivable Inventories $41,235 $320,558 1,056,911 733,700 837,377 803,707 101,811 Other 109,456 $2,220,625 Total current assets Property and equipment, net Other assets 1,666,588 247,892 $1,784,130 1,813,948 248,372 $3,846,450 $4,135,105 Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses Other current liabilities $309,092 274,220 $250,363 347,892 15,700 93,489 137,466 Income taxes Other current liabilities 15,700 Income taxes 93,489 137.466 Total current liabilities $707,414 $720,778 Long-term debt 541,639 Deferred income taxes 274,844 650,000 275,101 61,267 1,693,812 Other long-term liabilities 41,572 Total liabilities 1,578,833 Stockholders' equity: Preferred stock $100,000 $100,000 89,727 Common stock 89,727 128,906 127,776 Additional paid-in capital-common stock Retained earnings 2,136,794 Less: Treasury stock, at cost Total stockholders' equity Total liabilities and stockholders' equity 2,397,112 $2,715,745 (274,452) $2,441,293 $4,135,105 $2,454,297 (186,680) $2,267,617 $3,846,450 Use the information provided above and below to respond to the following requirements. Statement Item January 1, 2018 (in thousands) Bot Check My Work Statement Item Total assets Total stockholders' equity ary 1, 2018 (in thousands) $3,485,233 2,083,122 Required: Compute the five profitability ratios for 2018 and 2019. Round intermediate calculations and final answers to two decimal plac 2019 2018 Gross profit percentage 27.04 % 28.67 % Operating margin percentage 9.689 11.36 % Net profit margin percentage 5.40 6.56 % Return on assets Return on equity 16.61 % 20.94 % Feedback Check My Work Gross profit percentage measures profitability and is a key indicator of a company's ability to sell inventory at a profit. It measu sales Operating margin percentage measures profitability and is a key indicator of a company's ability to generate profits. It measur sales. Net profit margin percentage measures the proportion of net income to net sales. Check My Work BUT provided above and below to respond to the following requirements Year ended December 31, 2019 2018 Average number of common shares outstanding (thousands) Preferred dividends (thousands) 362,202 364,398 $24,000 $24,000 Dividends per common share 0.36 Common dividends (thousands) 1.54 561,172.30 130,861.00 Common stock repurchases Market price per share: High 83.25 Low 63.25 79.10 59.00 66.36 78.42 Close At January 1, 2018, total stockholders' equity was $2,083,122 and there was no preferred stock. Required: 1. Compute the earnings per share, return on common equity, dividend yield ratio, and dividend payout ratio (in percentage terms, rounded be rounded to nearest cent) for 2018 and 2019. 2019 2018 1.18 1.01 Earnings per share Check My Work 30,000 Commar ock purdes Market price per share: High 83.25 Low 63.25 79.10 59.00 66.36 Close 78.12 At January 1, 2018, total stockholders' equity was $2,083,122 and there was no preferred stock. Required: 1. Compute the earnings per share, return on common equity, dividend yield ratio, and dividend payout ratio (in percentage terms, rounded to be be rounded to nearest cent) for 2018 and 2019. 2019 2018 Earnings per share 1.18 1.01 Return on common equity 0.46 % Dividend yield ratio 2.32 123.20 % % 33.45 % Dividend payout ratio 2. Conceptual Connection: Indicate whether there were significant changes in these ratios between the years ended December 31, 2019, an All the ratios decreased Determine whether the stockholder ratios suggest that Steele was a better investment at December 31, 2019, or December 31, 2018. December 31, 2018 Check My Work Exercise 12-81 Profitability Ratios Financial statements for Steele Inc. follow Steele Inc. 2017 $6,149,218 (4,355,675) $1,793,543 (1,080,843) Consolidated Income Statements (in thousands except per share amounts) 2019 2018 Net sales $7,245,088 $6,944,296 Cost of goods sold (5,286,253) (4,953,556) Gross margin $1,958,835 $1,990,740 General and administrative expenses (1,259,896) (1,202,042) Special and nonrecurring items 2,617 Operating income $701,556 $788,698 (63,685) (62,398) Interest expense 7,308 10,080 Other income 9.117 Gain on sale of investments $645,179 Income before income taxes (254,000) (290,000) Provision for income taxes $391,179 $455,497 Net income $712,700 (63,927) 11,529 $745,497 $660,302 (257,000) $403,302 Check My Work Provision for income taxes Net Income (254,000) (290,000) (257,000) $391,179 $455,497 $403,302 Steele Inc. Consolidated Balance Sheets (in thousands) Dec 31, 2019 Dec 31, 2018 ASSETS Current assets: Cash and equivalents Accounts receivable Inventories Other Total current assets Property and equipment, net Other assets $320,558 1,056,911 733,700 109.456 $2.220.525 1,666,589 247.892 $4.135,105 $41.235 837,377 803,707 101,811 $1,784,130 1.81945 248,372 Total assets 2.546.450 LIABILITIES AND STOCKHOLDE EQUITY Current liabilities Accounts payable $250,363 309,092 274220 Accrued expenses. Hy work eBook Calculator Print item LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $309,092 274,220 Accrued expenses Other current liabilities $250,363 347,892 15,700 93,489 $707,444 Income taxes Total current liabilities 137,466 $720,778 541,639 274,844 Long-term debt 650,000 275,101 Deferred income taxes 61,267 41,572 1,693,812 1,578,833 Other long-term liabilities Total liabilities Stockholders' equity: Preferred stock Common stock Additional paid-in capital-common stock Retained earnings $100,000 89,727 128,906 2,397,112 $2.715,745 (274,452) $2,441,293 $4,135,105 $100,000 89,727 127,776 2,136,794 $2,454,297 (186,680) $2,267,617 $3,846,450 Less: Treasury stock, at cost Total stockholders' equity Total liabilities and stockholders' equity Check My Work $2,454,297 $2,715,745 (274,452) (186,680) Less: Treasury stock, at cost Total stockholders' equity $2,441,293 $2,267,617 Total liabilities and stockholders' equity $4,135,105 $3,846,450 Use the information provided above and below to respond to the following requirements. Statement Item Total assets Total stockholders' equity January 1, 2018 (in thousands) $3,485,233 2,083,122 Required: Compute the five profitability ratios for 2018 and 2019. Round intermediate calculations and final answers to two decimal places. 2018 2019 28.67 % 27.04 9.68 % % 11.36 % Gross profit percentage 6.56 % Operating margin percentage 5.40 % Net profit margin percentage 20.94 % 96 Return on assets 16.61 Return on equity Check My Work $2,454,297 $2.715,745 (274,452) (186,680) Less: Treasury stock, at cost Total stockholders' equity Total liabilities and stockholders' equity $2,441,293 $2,267,617 $4,135,105 $3,846,450 Use the information provided above and below to respond to the following requirements. Year ended December 31, 2018 Item 2019 362,202 364,398 $24,000 $24,000 0.36 1.54 Average number of common shares outstanding (thousands) Preferred dividends (thousands) Dividends per common share Common dividends (thousands) Common stock repurchases 130,861.00 561,172.30 Market price per share: 83.25 High 63.25 78.42 79.10 59.00 66.36 LOW Close At January 1, 2018, total stockholders' equity was $2,083,122 and there was no preferred stock. Required: Check My Work All work saved Common stock repurchases Market price per share: 79.10 83.25 High 59.00 63.25 LOW 78.42 66.36 Close At January 1, 2018, total stockholders' equity was $2,083,122 and there was no preferred stock. Required: 1. Compute the earnings per share, return on common equity, dividend yield ratio, and dividend payout ratio (in percentage tem be rounded to nearest cent) for 2018 and 2019. 2019 2018 1.18 1.01 Earnings per share Return on common equity Dividend yield ratio 2.32 % 0.46 % 20 Dividend payout ratio 33.45 % 2. Conceptual Connection: Indicate whether there were significant changes in these ratios between the years ended December 31, - All the ratios decreased Determine whether the stockholder ratios suggest that Steele was a better investment at December 31, 2019. or December 31, 2017 December 31, 2018 V Ched, My Work All work saved