DO ONLY EXERCISE 17-12

Sanderson Company's year-end balance sheets follow. Express the balance sheets in common-size per- Exercise 17-7 cents. Round amounts to the nearest one-tenth of a percent. Analyze and comment on the results. Common-size percents At December 31 2012 201 1 2010 P2 1 Assets Cash . . . . . .. .. ..... $ 30,800 $ 35,625 $ 36,800 Accounts receivable, net . 88.500 62.500 49.200 Merchandise inventory 1 11.500 82.500 53,000 Prepaid expenses 9,700 9.375 4.000 Plant assets, net . . . . . . . 277.500 255,000 229,500 Total assets . . . . . $518,000 $445,000 $372,500 Liabilities and Equity Accounts payable $128,900 $ 75,250 $ 49,250 Long-term notes payable secured by mortgages on plant assets 97.500 102.500 82.500 Common stock, $10 par value 162,500 162.500 162,500 Retained earnings .. 129,100 104,750 78,250 Total liabilities and equity . . . . . . . . . . . . $518.000 $445,000 $372,500 Refer to Sanderson Company's balance sheets in Exercise 17-7. Analyze its year-end short-term liquidity Exercise 17-8 position at the end of 2012, 2011, and 2010 by computing (1) the current ratio and (2) the acid-test ratio. Liquidity analysis Comment on the ratio results. (Round ratio amounts to two decimals.) P3 718 Chapter 17 Analysis of Financial Statements Exercise 17-9 Refer to the Sanderson Company information in Exercise 17-7. The company's income statements for the Liquidity analysis and years ended December 31, 2012 and 2011, follow. Assume that all sales are on credit and then compute: interpretation (1) days' sales uncollected, (2) accounts receivable turnover, (3) inventory turnover, and (4) days' sales in P3 1 inventory. Comment on the changes in the ratios from 2011 to 2012. (Round amounts to one decimal.) For Year Ended December 31 2012 201 Sales . . . . . . . .. . .. . ..MERRILL $672,500 $530,000 Cost of goods sold . . . . . . . . ... $410,225 $344,500 Other operating expenses .. . . . . . . 208,550 133,980 Interest expense . . . . 1 1,100 12.300 Income taxes . . 8,525 7.845 Total costs and expenses 638,400 498,625 Net income . .. $ 34.100 $ 31.375 Earnings per share . . . 2.10 1.93 Exercise 17-10 Refer to the Sanderson Company information in Exercises 17-7 and 17-9. Compare the company's long- Risk and capital structure term risk and capital structure positions at the end of 2012 and 2011 by computing these ratios: (1) debt analysis P3 I and equity ratios, (2) debt-to-equity ratio, and (3) times interest earned. Comment on these ratio results. Exercise 17-11 Refer to Sanderson Company's financial information in Exercises 17-7 and 17-9. Evaluate the company's Efficiency and efficiency and profitability by computing the following for 2012 and 2011: (1) profit margin ratio, (2) total profitability analysis P3 1 asset turnover, and (3) return on total assets. Comment on these ratio results. Exercise 17-12 Refer to Sanderson Company's financial information in Exercises 17-7 and 17-9. Additional information Profitability analysis about the company follows. To help evaluate the company's profitability, compute and interpret the fol- P3 lowing ratios for 2012 and 2011: (1) return on common stockholders' equity, (2) price-earnings ratio on December 31, and (3) dividend yield. Common stock market price, December 31, 2012 . ....... $15.00 Common stock market price, December 31, 201 1 . . ...... 14.00 Annual cash dividends per share in 2012 .... . . . ...... 0.30 Annual cash dividends per share in 201 1 ... . . . . . . . . . . ... 0.15