Other Information: Project 7 Use ratios to evaluate a stock investment 1. Market price of Tarrant, Inc. common stock: $122.91 at December 31, 2018, and $165.75 at December 31, 2017. Financial statement data for Tarrant, Inc. follows: 2. Common shares outstanding: 13,000 during 2018 and 8000 during 2017 Tarrant Inc. Comparative Income Statements 3. All sales on credit Years Ended December 31, 2018 and 2017 2018 2017 4. Cash dividends paid per share: 52.75 per share in 2018 and 54.00 per share in 2017. Net Income $686,000 $595,000 Cost of goods sold 382,000 276,000 Requirements: Gross Profit 304,000 319.000 1. Calculate the following ratios for 2018 and 2017: Operating expenses 132,000 150,000 a. Current ratio Income from operations 172,000 169.000 6. Quick (acid-test) ratio Interest Expense 38,000 45,000 c. Receivables tumover and day's sale outstanding (DSO) - round to the nearest Income before income tax 134,000 124,000 whole day Income tax expense 40,000 46,000 d. Inventory tumover and day's inventory outstanding (DIO) - round to the nearest Net Income $94,000 $78,000 whole day e. Accounts payable tumover and day's payable outstanding (DPO) - use of cost of Tarrant Corporation goods sold in the tumover ratio and round DPO to the nearest whole day Balance Sheet f. Cash conversion cycle (in days) December 31, 2018 and 2017 g. Times - interest - eamed ratio 2018 2017 2016 h. Retum on assets - use DuPont Analysis Current assets.: i. Retum on common stockholders' equity - use DuPont Analysis Cash $42.000 $82,000 j. Earnings per share of common stock Current receivable, net 212,000 155,000 132,000 k. Price - Eaming ratio Inventory 299,000 288,000 $180,000 Prepaid expenses 12,000 27,000 2. Decide whether (a) Tarrant Inc. financial position improved or deteriorated during Total Current Assets 565,000 552,000 2018 and (b) whether investment attractiveness of the company's common stock appears Plant and equipment, net 287,000 275,000 to have increased or decreased from 2017-2018. Total Assets $852,000 $827,000 $704,000 3. How will what you leamed in this problem help you evaluate an investment? Current Liabilities Accounts payable $140,000 $114,000 $108,000! Other current liabilities 137,000 176,000 Total current liabilities 277,000 290,000 Long-term liabilities 244,000 234,000 Total liabilities 521,000 524,000 Common stockholder's equity, no par 331,000 303,000 $195,000 Total liabilities and stockholder's equity S852,000 $827,000
