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P13-3A Perform ratio analysis, and discuss change in financial position and operating results Condensed balance sheet and income statement data for Jergan Corporation are presented
| P13-3A Perform ratio analysis, and discuss change in financial position and operating results | |||||||||||
| Condensed balance sheet and income statement data for Jergan Corporation are presented here. | |||||||||||
| JERGAN CORPORATION | |||||||||||
| Balance Sheet | |||||||||||
| December 31 | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Cash | $30,000 | $20,000 | $18,000 | ||||||||
| Accounts receivable (net) | 50,000 | 45,000 | 48,000 | ||||||||
| Other current assets | 90,000 | 95,000 | 64,000 | ||||||||
| Investments | 55,000 | 70,000 | 45,000 | ||||||||
| Plant and equipment (net) | 500,000 | 370,000 | 358,000 | ||||||||
| $725,000 | $600,000 | $533,000 | |||||||||
| Current liabilities | $85,000 | $80,000 | $70,000 | ||||||||
| Long-term debt | 145,000 | 85,000 | 50,000 | ||||||||
| Common stock, $10 par | 320,000 | 310,000 | 300,000 | ||||||||
| Retained Earnings | 175,000 | 125,000 | 113,000 | ||||||||
| $725,000 | $600,000 | $533,000 | |||||||||
| JERGAN CORPORATION | |||||||||||
| Income Statement | |||||||||||
| For the Year Ended December 31 | |||||||||||
| 2017 | 2016 | ||||||||||
| Sales revenue | $740,000 | $600,000 | |||||||||
| Less: Sales return and allowances | 40,000 | 30,000 | |||||||||
| Net sales | 700,000 | 570,000 | |||||||||
| Cost of goods sold | 425,000 | 350,000 | |||||||||
| Gross profit | 275,000 | 220,000 | |||||||||
| Operating expenses (including income taxes) | 180,000 | 150,000 | |||||||||
| Net income | 95,000 | 70,000 | |||||||||
| Additional information: | |||||||||||
| 1. | The market price of Jergan's common stock was $7.00, $7.50, and $8.50 for 2012, | ||||||||||
| 2016, and 2017, respectively. | |||||||||||
| 2. | You must compute dividends paid. All dividends were paid in cash. | ||||||||||
| Instructions | |||||||||||
| (a) | Compute the following ratios for 2016 and 2017. | ||||||||||
| (1) Profit margin. | 5. Price-earnings ratio. | ||||||||||
| (2) Gross profit rate. | 6. Payout ratio. | ||||||||||
| (3) Asset turnover. | 7. Debt to assets ratio. | ||||||||||
| (4) Earnings per share. | |||||||||||
| (b) | Based on the ratios calculated, discuss briefly the improvement or lack thereof in the | ||||||||||
| financial position and operating results from 2016 to 2017 of Jergan Corporation. | |||||||||||
| NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . | |||||||||||
| (a)(1) | Profit margin | ||||||||||
| 2017 | 2016 | ||||||||||
| Net income | Value | Value | |||||||||
| Net sales | Value | Value | |||||||||
| Profit margin | ? | ? | |||||||||
| (a)(2) | Gross profit rate | ||||||||||
| 2017 | 2016 | ||||||||||
| Gross profit | Value | Value | |||||||||
| Net sales | Value | Value | |||||||||
| Gross profit rate | ? | ? | |||||||||
| (a)(3) | Asset turnover | ||||||||||
| 2017 | 2016 | ||||||||||
| Total assets, 2017 | Value | ||||||||||
| Total assets, 2016 | Value | Value | |||||||||
| Total assets, 2015 | Value | ||||||||||
| Average total assets | ? | ? | |||||||||
| 2017 | 2016 | ||||||||||
| Net sales | Value | Value | |||||||||
| Average total assets | Value | Value | |||||||||
| Asset turnover | ? | ? | |||||||||
| (a)(4) | Earnings per share | ||||||||||
| 2017 | 2016 | ||||||||||
| Common shares outstanding, 2017 | Value | ||||||||||
| Common shares outstanding, 2016 | Value | Value | |||||||||
| Common shares outstanding, 2015 | Value | ||||||||||
| Average common shares outstanding | ? | ? | |||||||||
| 2017 | 2016 | ||||||||||
| Net income - Pfd. Dividends | Value | Value | |||||||||
| Average common shares outstanding | Value | Value | |||||||||
| Earnings per share | ? | ? | |||||||||
| (a)(5) | Price-earnings ratio | ||||||||||
| 2017 | 2016 | ||||||||||
| Stock price per share | Value | Value | |||||||||
| Earnings per share | Value | Value | |||||||||
| Price-earnings ratio | ? | ? | |||||||||
| (a)(6) | Payout ratio | ||||||||||
| 2017 | 2016 | ||||||||||
| Prior year's retained earnings | Value | Value | |||||||||
| Plus: current year net income | Value | Value | |||||||||
| Less: current year's retained earnings | Value | Value | |||||||||
| Cash dividends declared | ? | ? | |||||||||
| 2017 | 2016 | ||||||||||
| Cash dividends declared (common) | Value | Value | |||||||||
| Net income | Value | Value | |||||||||
| Payout ratio | ? | ? | |||||||||
| (a)(7) | Debt to assets ratio | ||||||||||
| 2017 | 2016 | ||||||||||
| Current Liabilities | Value | Value | |||||||||
| Long-term debt | Value | Value | |||||||||
| Total liabilities | ? | ? | |||||||||
| Total assets | Value | Value | |||||||||
| Debt to assets ratio | ? | ? | |||||||||
| After you have completed P13-3A, answer the additional question. | |||||||||||
| 1. | Assume that 2017 net income and total assets changed to $87,000 and total assets to | ||||||||||
| $700,000. Show the impact of these changes on the ratios. | |||||||||||
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