E18-13 The Serial Exercise involves a company that will be revisited throughout relevant chapters in Volume 1 and Volume 2. You can complete the Serial Exercise using MyLab Accounting. This exercise continues the Canyon Canoe Company situation from Chapter 170.- Students do not have to complete prior exercise in order to answer this question. The company wants to invest some of its excess cash in trading securities and is considering two investments, Paddle Company (PC) and Recreational Life Vests (RLV). The income statement, balance sheet, and other data for both companies follow for 2024 and 2023 as well as selected data for 2022: Comparative Financial Statements For the Years Ended December 31 2024 2023 2022 $410,570 5 383,870 299,110 280.190 111,460 103,680 78,290 70,830 33,170 32,850 2.780 2,980 30,390 29,870 8,780 8,630 $21,610 51215,240 Comparative Anandal Statements For the Years Ended December 31 Income Statement 2024 2023 2022 Net sales revenue $430,489 $425,410 Cost of goods sold 258,756 256,797 Gross margin 171.733 168,613 Operating expenses 153,880 151,922 Operating income 17.853 16,691 Interest expense 865 788 Income before income tax 16,988 15,903 Income tax expense 5.137 4,809 Net Income $ 11,851 5 11.094 Balance Sheet Assets Cash and cash equivalents $ 69,159 $ 70,793 Accounts receivable 44,798 44,452 $ 44,104 Inventory 79,919 66,341 76,363 Other current assets 15,494 16,264 Total current assets 209,370 197,850 Long-term assets 89,834 90,776 Total assets $ 299,204 $288,626 $276,482 Liabilities Current liabilities $ 69,554 $ 60,232 Long-term liabilities 31,682 29,936 Total liabilities 101,236 90.168 Shareholders' Equity Common shares 72,795 80,885 Retained earnings 125.173 117,573 Total shareholders equity 197,968 198.458 197,668 Total liabilities and shareholder's equity $299,204 5.288,626 Other Data $ 36,460 59,930 $ 65.730 39,810 68,500 24.450 198,490 116,760 $ 315,250 $ 55,270 38,650 65,230 37,630 196,780 116,270 $ 313,050 $310,640 $ 90,810 96,310 187,120 $ 90,010 105,890 195,900 111,530 16,600 128,130 $315250 102,480 14,670 112,150 $318,050 103,840 $ 90,810 96,310 187,120 $ 90,010 105,890 195.900 Liabilities Current liabilities $ 69,554 $ 60,232 Long-term liabilities 31,682 29,936 Total liabilities 101,236 90,168 Shareholders' Equity Common shares 72,795 80,885 Retained earnings 125,173 117,573 Total shareholders' equity 197,968 198,458 Total liabilities and shareholder's equity $ 299,204 $ 288,626 Other Data Market price per share $ 21.38$ 33.82 0.30 0.32 Annual dividend per share Weighted average number of shares outstanding 9,000 8,000 111,530 16,600 128,130 $315,250 102,480 14,670 117,150 $313,050 197,668 103,840 $ $ 46.37 0.53 51.64 0.45 9,000 8,000 1. Using the financial statements given, compute the following ratios for both companies for 2024 and 2023. Assume all sales are credit sales. Round all ratios to two decimal places. a. Current ratio b. Inventory turnover c. Accounts receivable turnover d. Gross margin percentage e. Debt ratio f. Return on assets g. Return on common shareholders' equity h. Earnings per share i. Price-earnings ratio j. Dividend yield 2. Compare the companies' performance for 2024 and 2023. Make a recommendation to Canyon Canoe Company about investing in these companies. Which company would be a better investment, Paddle Company or Recreational Life Vests? Base your answer on ability to pay current liabilities, ability to sell merchandise and collect receivables, ability to pay long-term debt, profitability, and attractiveness as an investment. a
