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P14-3 Perform ratio analysis and evaluate financial position and operating results Condensed balance sheet and income statement data for Landwehr Corporation appear below and on
P14-3 Perform ratio analysis and evaluate financial position and operating results | |||||||||
Condensed balance sheet and income statement data for Landwehr Corporation appear | |||||||||
below and on page 644. | |||||||||
LANDWEHR CORPORATION | |||||||||
Balance Sheets | |||||||||
December 31 | |||||||||
2018 | 2017 | 2016 | |||||||
Cash | 25,000 | 20,000 | 18,000 | ||||||
Accounts receivable (net) | 50,000 | 45,000 | 48,000 | ||||||
Other current assets | 90,000 | 95,000 | 64,000 | ||||||
Investments | 75,000 | 70,000 | 45,000 | ||||||
Plant and equipment (net) | 400,000 | 370,000 | 358,000 | ||||||
640,000 | 600,000 | 533,000 | |||||||
Current liabilities | 75,000 | 80,000 | 70,000 | ||||||
Long-term debt | 80,000 | 85,000 | 50,000 | ||||||
Common stock, $10 par | 340,000 | 310,000 | 300,000 | ||||||
Retained earnings | 145,000 | 125,000 | 113,000 | ||||||
640,000 | 600,000 | 533,000 | |||||||
LANDWEHR CORPORATION | |||||||||
Income Statement | |||||||||
For the Years Ended December 31 | |||||||||
2018 | 2017 | ||||||||
Sales revenue | $740,000 | $700,000 | |||||||
Less: Sales returns and allowances | 40,000 | 50,000 | |||||||
Net sales | 700,000 | 650,000 | |||||||
Cost of goods sold | 420,000 | 400,000 | |||||||
Gross profit | 280,000 | 250,000 | |||||||
Operating expenses (including income taxes) | 235,000 | 220,000 | |||||||
Net income | $45,000 | $30,000 | |||||||
Additional information: | |||||||||
1. The market price of Landwehr's common stock was $4.00, $5.00, and $8.00 for | |||||||||
2016, 2017 and 2018, respectively. | |||||||||
2. All dividends are paid in cash. | |||||||||
Instructions | |||||||||
(a) | Compute the following ratios for 2017 and 2018. | ||||||||
(1) Profit margin. | |||||||||
(2) Asset turnover. | |||||||||
(3) Earnings per share (Weighted-average common shares in 2018 were 32,000 and | |||||||||
in 2017 were 31,000.) | |||||||||
(4) Price-earnings ratio. | |||||||||
(5) Payout ratio. | |||||||||
(6) Debt to assets ratio. | |||||||||
(b) | Based on the ratios calculated, discuss briefly the improvement or lack thereof in | ||||||||
financial position and operating results from 2017 to 2018 of Landwehr Corporation. | |||||||||
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . | |||||||||
2017 | 2018 | |||||||||
(a) | Profit margin: | Profit margin: | ||||||||
Net income | Value | Net income | Value | |||||||
Net sales | Value | Net sales | Value | |||||||
Asset turnover: | Asset turnover: | |||||||||
Net sales | Value | Net sales | Value | |||||||
Average total assets | Value | Average total assets | Value | |||||||
Earnings per share: | Earnings per share: | |||||||||
Net income - Pfd. Dividends | Value | Net income - Pfd. Dividends | Value | |||||||
Weighted average common shares outstanding | Value | Weighted average common shares outstanding | Value | |||||||
Price-earnings ratio: | Price-earnings ratio: | |||||||||
Market price per share | Value | Market price per share | Value | |||||||
Earnings per share | Value | Earnings per share | Value | |||||||
Payout ratio: | Payout ratio: | |||||||||
Cash dividends declared on common | Value | Cash dividends declared on common | Value | |||||||
Net income | Value | Net income | Value | |||||||
Debt to assets ratio: | Debt to assets ratio: | |||||||||
Total liabilities | Value | Total liabilities | Value | |||||||
Total assets | Value | Total assets | Value | |||||||
(b) | Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results | |||||||||
from 2017 to 2018 of Landwehr Corporation. | ||||||||||
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