Looking for Help With memo/ calculations, Thanks!
Mobile Company Comparative Income Statement and Reconciliation This Year Last Year Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes income taxes (30%) Net income Dividends paid Preferred dividends Common dividends lotal dividends paid Net income retained Retained earnings, beginning of year Retained earnings, end of year $5,400,000$4,220,000 4,070,0003,160,000 1,060,000 530,000 510,000 550,000 1,330,000 800,000 672,000 201,600132,600 470,400 309,400 442,000 48,000 48,000 360,400 230,400 591,400 361,000 Loretta Young, who just two years ago was appointed president of Mobile Company, admits that the company has been "inconsistent" in its performance over the past several years. But Young argues that the company has its costs under control and is now experiencing strong sales growth, as evidenced by the more than 27% increase in sales over the last year, Young also argues that investors have recognized the improving situation at Mobile Company, as shown by the jump in the price of its common stock from $38 per share last year to $54 per share this year. Young believes that with strong leadership and with the modernized equipment that the $1,000,000 loan will enable the company to buy, profits will be even stronger in the future Anxious to impress your supervisor, you decide to generate all the information you can about the company. You determine that the following ratios are typical of companies in Mobile's industry: 1.2 31 days 60 days 9.5% 0.65 5.7 10 Average collection period... Return on assets Times interest earned Price-earnings ratio Required: CALCULATIONS 1. You decide first to assess the rate of return that the company is generating. Compute the following for both this year and last year: a. The return on total assets. (Total assets at the beginning of last year were $4,360,000.) b. The return on common stockholders' equity. (Stockholders' equity at the beginning of last year totaled $4,519,185. There has been no change in preferred or common stock over the last two years.) 2. You decide next to assess the well-being of the common stockholders. For both this year and last year, compute: a. The earnings per share b. The dividend yield ratio for common stock. c. The dividend payout ratio for common stock. d. The price-earnings ratio. How do investors regard Mobile Company as compared to other companies in the industry? Explain. e. The book value per share of common stock. 3. You decide, finally, to assess creditor ratios to determine both short-term and long-term debt paying ability. For both this year and last year, compute: a. Working capital. b. The current ratio C. The acid-test ratio. d. The average collection period. (The accounts receivable at the beginning of last year totaled $520,000.) e. The average sale period. (The inventory at the beginning of last year totaled $650,000.) f. The debt-to-equity ratio. g. The times interest earned. Mobile Company Comparative Income Statement and Reconciliation This Year Last Year Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes income taxes (30%) Net income Dividends paid Preferred dividends Common dividends lotal dividends paid Net income retained Retained earnings, beginning of year Retained earnings, end of year $5,400,000$4,220,000 4,070,0003,160,000 1,060,000 530,000 510,000 550,000 1,330,000 800,000 672,000 201,600132,600 470,400 309,400 442,000 48,000 48,000 360,400 230,400 591,400 361,000 Loretta Young, who just two years ago was appointed president of Mobile Company, admits that the company has been "inconsistent" in its performance over the past several years. But Young argues that the company has its costs under control and is now experiencing strong sales growth, as evidenced by the more than 27% increase in sales over the last year, Young also argues that investors have recognized the improving situation at Mobile Company, as shown by the jump in the price of its common stock from $38 per share last year to $54 per share this year. Young believes that with strong leadership and with the modernized equipment that the $1,000,000 loan will enable the company to buy, profits will be even stronger in the future Anxious to impress your supervisor, you decide to generate all the information you can about the company. You determine that the following ratios are typical of companies in Mobile's industry: 1.2 31 days 60 days 9.5% 0.65 5.7 10 Average collection period... Return on assets Times interest earned Price-earnings ratio Required: CALCULATIONS 1. You decide first to assess the rate of return that the company is generating. Compute the following for both this year and last year: a. The return on total assets. (Total assets at the beginning of last year were $4,360,000.) b. The return on common stockholders' equity. (Stockholders' equity at the beginning of last year totaled $4,519,185. There has been no change in preferred or common stock over the last two years.) 2. You decide next to assess the well-being of the common stockholders. For both this year and last year, compute: a. The earnings per share b. The dividend yield ratio for common stock. c. The dividend payout ratio for common stock. d. The price-earnings ratio. How do investors regard Mobile Company as compared to other companies in the industry? Explain. e. The book value per share of common stock. 3. You decide, finally, to assess creditor ratios to determine both short-term and long-term debt paying ability. For both this year and last year, compute: a. Working capital. b. The current ratio C. The acid-test ratio. d. The average collection period. (The accounts receivable at the beginning of last year totaled $520,000.) e. The average sale period. (The inventory at the beginning of last year totaled $650,000.) f. The debt-to-equity ratio. g. The times interest earned
