PA13-2 Analyzing Comparative Financial Statements Using Selected Ratios [LO4, LO5) The comparative financial statements prepared at December 31, 2014, for Pinnacle Plus showed the following summarized data: ded 2014 2013 Income Statement Sales Revenue Cost of Goods Sold $116,000 54,400 $105,000 50,400 Gross Profit Operating Expenses Interest Expense 61,600 37,800 4,600 54,600 I 34,800 4.600 Income before Income Tax Expense Income Tax Expense (30%) 19,200 5,760 15,200 4,560 Net Income $ 13,440 $ 10,640 Balance Sheet Cash Accounts Receivable, Net Inventory Property and equipment, Net $ 59,742 43,000 28,000 107.000 $ 15,740 35,000 44,000 117,000 Total Assets $237,742 $ 211,740 Total Assets $237,742 $ 211,740 Accounts Payable Income Taxes Payable Note Payable, Long-Term $ 63,342 1,060 46,000 $ 44,080 560 46,000 ed Total Liabilities Contributed Capital (9,300 shares) Retained Earningst 110,402 93,000 34,340 90,640 93,000 28,100 Total Liabilities and Shareholders' Equity $237,742 $ 211,740 One-half of all sales are on credit. During 2014, cash dividends amounting to $7,200 were declared and paid. Required: 1-a. Compute the gross profit percentage in 2014 and 2013. (Round your answers to 1 decimal place.) Gross Profit Percentage 53.1 % 2014 3-a. Compute the earnings per share for 2014 and 2013. (Round your answers to 2 decimal places.) Earnings per Share 1.45 $ 1.12 2014 2013 3-b. Does the trend look good or bad? Good Bad 4-a. Shareholders' equity totalled $100.000 at the end of 2012. Compute the return on equity (ROE) ratios for 2014 and 2013. (Round your answers to 1 decimal place.) 2014 Return on Equity 10.6 % % BA% 2013 2014 Return on Equity 10.6 % % 8.6 % 2013 4-b. is the trend going in the right direction? No Yes 5-a. Net property and equipment totalled $122,000 at the end of 2012. Compute the fixed asset turnover ratios for 2014 and 2013. (Round your answers to 2 decimal places.) Fixed Asset Turnover 1.08 X 2014 2013 0.90 Bad Good 8-a. After Pinnacle Plus released its 2014 financial statements, the company's shares were trading at $40.40. After the release of its 2013 financial statements, the company's share price was $34.10 per share. Compute the P/E ratios for both years. (Round your answers to 1 decimal place.) 2014 2013 Pricel Earnings 27.9 30.4 8-b. Does it appear that investors have become more (or less) optimistic about Pinnacle's future success? More optimistic Less optimistic
