ABC company$$s financial statements for the two most recent years follow:

ABC Company

Comparative Balance Sheet

This Year Last Year

Assets

Current assets:

Cash $ $135,000$ $ $330,000$

Marketable securities $015,000$

Accounts receivable, net $711,000480,000$

Inventory $1,125,000775,000$

Prepaid expenses $38,00040,000$

Total current assets $2,009,0001,640,000$

Plant and equipment, net $2,245,0001,550,000$

Total assets $ $4,254,000$ $ $3,190,000$

Liabilities and Stockholders' Equity

Liabilities:

Current liabilities $ $850,000$ $ $400,000$

Bonds payable, $12\%800,000800,000$

Total liabilities $1,650,0001,200,000$

Stockholders' equity:

Common stock, $$15$ par $870,000870,000$

Retained earnings $1,734,0001,120,000$

Total stockholders$$ equity $2,604,0001,990,000$

Total liabilities and stockholders' equity $ $4,254,000$ $ $3,190,000$

ABC Company

Comparative Income Statement and Reconciliation

This Year Last Year

Sales $ $5,900,000$ $ $4,890,000$

Cost of goods sold $4,055,0003,630,000$

Gross margin $1,845,0001,260,000$

Selling and administrative expenses $689,000584,000$

Net operating income $1,156,000676,000$

Interest expense $96,00096,000$

Net income before taxes $1,060,000580,000$

Income taxes $(30\%)318,000174,000$

Net income $742,000406,000$

Common dividends $128,000107,000$

Net income retained $614,000299,000$

Beginning retained earnings $1,120,000821,000$

Ending retained earnings $ $1,734,000$ $ $1,120,000$

Assess the company$$s profitability and stock market performance.

Hint $-$ The number of common shares outstanding can be calculated by dividing the dollar amount of common stock, reported on the balance sheet, by the par value per share.

Hint $-$ Dividends per share can be calculated by dividing the common dividends dollar amount by the number of common shares outstanding.

Required:

$1.$ You decide first to assess the company$$s stock market performance. For both this year and last year, compute:

a$.$ The earnings per share. There has been no change in common stock over the last two years.

b$.$ The dividend yield ratio. The company$$s stock is currently selling for $$55$ per share; last year it sold for $$50$ per share.

c$.$ The dividend payout ratio.

d$.$ The price$-$earnings ratio. $($Assume that the industry norm for the price$-$earnings ratio is $11)$

$2.$ You decide next to assess the company$$s profitability. Compute the following for both this year and last year:

a$.$ The gross margin percentage.

b$.$ The net profit margin percentage.