| The comparative financial statements prepared at December 31 for Pinnacle Plus showed the following summarized data: | | Current Year | Previous Year | | Income Statement | | | | | | | | Sales Revenue | $ | 110,000 | | $ | 99,000 | | | Cost of Goods Sold | | 52,000 | | | 48,000 | | | | | | | | | | | Gross Profit | | 58,000 | | | 51,000 | | | Operating Expenses | | 36,000 | | | 33,000 | | | Interest Expense | | 4,000 | | | 4,000 | | | | | | | | | | | Income before Income Tax Expense | | 18,000 | | | 14,000 | | | Income Tax Expense (30%) | | 5,400 | | | 4,200 | | | | | | | | | | | Net Income | $ | 12,600 | | $ | 9,800 | | | | | | | | | | | Balance Sheet | | | | | | | | Cash | $ | 69,500 | | $ | 38,000 | | | Accounts Receivable, Net | | 17,000 | | | 12,000 | | | Inventory | | 25,000 | | | 38,000 | | | Property and Equipment, Net | | 95,000 | | | 105,000 | | | | | | | | | | | Total Assets | $ | 206,500 | | $ | 193,000 | | | | | | | | | | | Accounts Payable | $ | 42,000 | | $ | 35,000 | | | Income Tax Payable | | 1,000 | | | 500 | | | Note Payable (long-term) | | 40,000 | | | 40,000 | | | | | | | | | | | Total Liabilities | | 83,000 | | | 75,500 | | | Common Stock (par $10) | | 90,000 | | | 90,000 | | | Retained Earnings | | 33,500 | | | 27,500 | | | | | | | | | | | Total Liabilities and Stockholders Equity | $ | 206,500 | | $ | 193,000 | | | | | | | | | | | | | During the current year, cash dividends amounting to $6,600 were declared and paid. | 1-a. | Compute the gross profit percentage in the current and previous years. (Round your answers to 1 decimal place.) | | 1-b. | Are the current year results better, or worse, than those for the previous year? | | | | | | | | 2-a. | Compute the net profit margin for the current and previous years. (Round your answers to 1 decimal place.) | | 2-b. | Are the current year results better, or worse, than those for the previous year? | | | | | | | | 3-a. | Compute the earnings per share for the current and previous years. (Round your answers to 2 decimal places.) | | 3-b. | Are the current year results better, or worse, than those for the previous year? | | | | | | | | 4-a. | Stockholders' equity totaled $100,000 at the beginning of the previous year. Compute the return on equity (ROE) ratios for the current and previous years. (Round your answers to 1 decimal place.) | | 4-b. | Are the current year results better, or worse, than those for the previous year? | | | | | | | | 5-a. | Net property and equipment totaled $110,000 at the beginning of the previous year. Compute the fixed asset turnover ratios for the current and previous years. (Round your answers to 2 decimal places.) | | 5-b. | Are the current year results better, or worse, than those for the previous year? | | | | | | | | 6-a. | Compute the debt-to-assets ratios for the current and previous years. (Round your answers to 2 decimal places.) | | 6-b. | Is debt providing financing for a larger or smaller proportion of the company's asset growth? | | | | | | | | Larger Proportion | | | Smaller Proportion | | | 7-a. | Compute the times interest earned ratios for the current and previous years. (Round your answers to 1 decimal place.) | | 7-b. | Are the current year results better, or worse, than those for the previous year? | | | | | | | | 8-a. | After Pinnacle Plus released its current year's financial statements, the company's stock was trading at $18. After the release of its previous year's financial statements, the company's stock price was $15 per share. Compute the P/E ratios for both years. (Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place.) | | 8-b. | Does it appear that investors have become more (or less) optimistic about Pinnacle's future success? | | | | | | | | More Optimistic | | | Less Optimistic | | | |
