P13-9. Ratios Compared with Industry Averages Adams Plastics, Inc., manufactures various plastic and synthetic products. Financial statements data for the firm follow:

2019

(Thousands of Dollars,

except Earnings per Share)

Sales Revenue...................................................................................................$825,000

Cost of goods sold................................................................................................550,000

Net income........................................................................................................50,500

Dividends.............................................................................................................................17,500

Earnings per share...............................................................................................................4.04

ADAMS PLASTICS, INC.

Balance Sheets

(Thousands of Dollars)

Dec. 31, 2019 Dec. 31, 3018

Assets

Cash.......................................................................................................$ 2,100$ 2,700

Accounts Receivable (net).......................................................................66,90060,900

Inventory.............................................................................................148,000140,000

Total current assets.......................................................................217,000203,600

Plant assets (net)...............................................................................215,000 194,000

Other assets.....................................................................................13,900 4,000

Total assets.......................................................................................$445,900 $401,600

Liabilities and Stockholders' Equity

Notes payable-banks.......................................................................$ 31,400$25,000

Accounts payable.............................................................................27, 60023,000

Accrued liabilities.............................................................................25,10024,800

Total current liabilities..................................................................84,100 72,800

10% bonds payable.......................................................................150,000150,000

Total liabilities.............................................................................234,100 222, 800

Common stock, $10 par value (12,500,000 shares).....................125,000 125,000

Retained earnings.........................................................................86,80053,800

Total liabilities and stockholders' equity......................................211,800 178,800

Total liabilities and stockholders' equity.......................................$445, 900 $401,600

required

a. Using the given data, calculate items 1 through 8 below for 2019. Compare the performance of Adams Plastics, Inc., with the following industry averages and comment on its operations.

Median Ratios for

Manufacturers of Plastic and

Synthetic Products

1. Quick ratio.............................................................................................................................................1.2

2. Current ratio..........................................................................................................................................1.9

3. Accounts receivable turnover................................................................................................................7.9 times

4. Inventory turnover................................................................................................................................7.8 times

5. Debt-to-equity ratio............................................................................................................................0.95

6. Gross profit percentage...................................................................................................................32.7 percent

7. Return on sales............................................................................................................................3.5 percent

8. Return on assets........................................................................................................................6.3 percent

b. Calculate the dividends paid per share of common stock. What was the dividend payout ratio?

c. If the most recent price per share of common stock is $51.00, what is the price-earnings ratio? The dividend yield?