Part B is were I am stuck
V (b) The following are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2017, and (2) as of December 31, 2018, after giving effect to the situation. (Round all answers to 1 decimal places, e.g. 1.8 or 1.8%. If % change is a decrease show the numbers as negative, e.g. -1.83% or (1.83%).) Situation Ratio 1. 20,000 shares of common stock were sold at par on July 1, 2018. Net income for 2018 was $55,000. Return on common stockholders' equity 2. All of the notes payable were paid in 2018. All other liabilities remained at the same levels as at December 31, 2018. At Debt to assets ratio December 31, 2018, total assets were $895,000. 3. The market price of common stock was $9 and $12 on December 31, 2017 and 2018, respectively. Net income for 2018 Price-earnings ratio was $55,000. 2018 2017 % Change Return on common stockholders' equity % % % Debt to assets ratio % % % Price earnings ratio times times % Question 3 The following nancial information is for Pharoah Company. PHAROAH COMPANY Balance Sheets December 3 1 Assets Cash Debt investments (short-term) Accounts receivable Inventory Prepaid expenses Land Building and equipment (net) Total assets Liabilities and Stockholders' Equity Notes payable Accounts payable Accrued liabilities Bonds payable, due 2020 Common stock, $10 par Retained earnings Total liabilities and stockholders' equity 2017 $ 72,000 54,000 107,000 236,000 30,000 133,000 260,000 $892,000 $170,000 65,000 42,000 250,000 209,000 156,000 $892,000 2016 $ 69,000 39,000 90,000 162,000 27,000 133,000 188,000 $708,000 $106,000 54,000 42,000 171,000 209,000 126,000 $708,000 PHAROAH COMPANY Income Statements For the Years Ended December 31 2017 2016 Sales revenue $898,000 $789,000 Cost of goods sold 647,000 575,000 Gross profit 251,000 214,000 Operating expenses 194,000 160,000 Net income $ 57,000 $ 54,000 Additional information: 1 Inventory at the beginning of 2016 was $115,000. 2. Accounts receivable (net) at the beginning of 2016 were $89,000. 3. Total assets at the beginning of 2016 were $633,000. 4 No common stock transactions occurred during 2016 or 2017. 5. All sales were on account. Your answer is partially correct. Try again. Compute the liquidity and profitability ratios of Pharoah Company for 2016 and 2017. (Round current ratio and asset turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 1.8%. If % change is a decrease show the numbers as negative, e.g. -1.83% or (1.83%).) 2017 2016 % Change LIQUIDITY Current ratio 1.80 : 1 1.92 : 1 5.97 Accounts receivables turnover 9.1 times 8.8 times 4.58 V Inventory turnover 3.3 times 4.2 times -0.9 2017 2016 % Change PROFITABILITY X x x Profit margin 28 27.1 o/c 0.8 Asset turnover 1.12 times 1.18 times -0.05 x x X Return on assets 6.4 7.6 -1.2 Earnings per share $ 2.7 $ 2.6 0.1
