Balance Sheet

Use the following balance sheet form to enter amounts you identify from the computations on the Liquidity and Solvency Measures part. You will identify other amounts for the balance sheet on the Profitability Measures part. If you have a choice of two amounts, assume the first amount in the ratio is for the end of the year. Compute any missing amounts.

Balance Sheet December 31, 20Y6

Assets

Current assets:

Cash$823,000

Marketable securities

Accounts receivable (net)

Inventory

Prepaid expenses

Total current assets$

Long-term investments

Property, plant, and equipment (net)

Total assets$

Liabilities

Current liabilities$

Long-term liabilities

Total liabilities$

Stockholders' Equity

Preferred stock, $10 par$

Common stock, $5 par

Retained earnings

Total stockholders' equity$

Total liabilities and stockholders' equity$

Feedback

Identify the amounts in the Liquidity and Solvency Measures panel and the Profitability Measures panel that are balance sheet items and enter them accordingly.

Profitability Measures

Match each computation to one of the profitability measures in the table.

Profitability Measures Computations

Asset turnover $8,250,000 [($5,781,000 + $5,591,000) 2]

Return on total assets ($786,300 + $127,000) [($6,605,000 + $6,415,000) 2]

Return on stockholders' equity $786,300 [($4,055,000 + $3,852,250) 2]

Return on common stockholders' equity ($786,300 $65,000) [($3,567,500 + $3,424,800) 2]

Earnings per share on common stock ($786,300 $65,000) 250,000 shares

Price-earnings ratio $35 $3.05

Dividends per share $175,000 250,000 shares

Dividend yield $0.70 $35

Feedback

Look for patterns in the computations and match them to ratios that are related to each other. Identify the amounts in the computations and consider how they are related to amounts in other computations. Note that two of the computations use shares.

Comparative Income Statement

Use the following comparative income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Measures part and on the Profitability Measures part. Compute any missing amounts and complete the horizontal analysis columns. Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only at the figure to the right of one decimal place. If < 5, round down and if 5, round up. For example, for 32.048% enter 32.0%. For 32.058% enter 32.1%.

Comparative Income Statement For the Years Ended December 31, 20Y6 and 20Y5

Increase/(Decrease)

20Y620Y5AmountPercentage

Sales $ $7,257,000 $ %

Cost of goods sold (3,444,000) %

Gross profit $ $3,813,000 $ %

Selling expenses $ $(1,451,000) $ %

Administrative expenses (1,237,500) (1,101,500) %

Total operating expenses $ $(2,552,500) $ %

Operating income $ $1,260,500 $ %

Other expense (interest) (120,600) %

Income before income tax expense $ $1,139,900 $ %

Income tax expense (178,200) %

Net income $ $961,700 $ %

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