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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 753. | |||||||||
| LANDWEHR CORPORATION | |||||||||
| Balance Sheets | |||||||||
| December 31 | |||||||||
| 2016 | 2015 | 2014 | |||||||
| 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 | |||||||||
| 2016 | 2015 | ||||||||
| Sales revenue | $740,000 | $700,000 | |||||||
| Less: Sales returns and allowances | 40000 | 50000 | |||||||
| Net sales | 700000 | 650000 | |||||||
| Cost of goods sold | 420000 | 400000 | |||||||
| Gross profit | 280000 | 250000 | |||||||
| Operating expenses (including income taxes) | 235000 | 220000 | |||||||
| 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 | |||||||||
| 2014, 2015 and 2016, respectively. | |||||||||
| 2. All dividends are paid in cash. | |||||||||
| Instructions | |||||||||
| (a) | Compute the following ratios for 2015 and 2016. | ||||||||
| (1) Profit margin. | |||||||||
| (2) Asset turnover. | |||||||||
| (3) Earnings per share (Weighted-average common shares in 2016 were 32,000 and | |||||||||
| in 2015 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 2015 to 2016 of Landwehr Corporation. | |||||||||
| NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . | |||||||||
| 2015 | 2016 | ||||||||
| (1) | Profit margin: | ||||||||
| Net income | Value | Net income | Value | ||||||
| Net sales | Value | Net sales | Value | ||||||
| Ratio | ? | Ratio | ? | ||||||
| (2) | Asset turnover: | ||||||||
| Net sales | Value | Net sales | Value | ||||||
| Average total assets | Value | Average total assets | Value | ||||||
| Ratio | ? | Ratio | ? | ||||||
| (3) | 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 | ||||||
| EPS | ? | EPS | ? | ||||||
| (4) | Price-earnings ratio: | ||||||||
| Market price per share | Value | Market price per share | Value | ||||||
| Earnings per share | Value | Earnings per share | Value | ||||||
| Ratio | ? | Ratio | ? | ||||||
| (5) | Payout ratio: | ||||||||
| Cash dividends declared on common | Value | Cash dividends declared on common | Value | ||||||
| Net income | Value | Net income | Value | ||||||
| Ratio | ? | Ratio | ? | ||||||
| (6) | Debt to assets ratio: | ||||||||
| Total liabilities | Value | Total liabilities | Value | ||||||
| Total assets | Value | Total assets | Value | ||||||
| Ratio | ? | Ratio | ? | ||||||
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