Profitability Measures		Computations
Asset turnover		$8,250,000 [($5,783,000 + $5,593,000) 2]
Return on total assets		($786,300 + $127,000) [($6,607,000 + $6,417,000) 2]
Return on stockholders' equity		$786,300 [($4,057,000 + $3,854,150) 2]
Return on common stockholders' equity		($786,300 $65,000) [($3,569,500 + $3,426,720) 2]
Earnings per share on common stock		($786,300 $65,000) 250,000 shares
Price-earnings ratio		$35 $3.05
Dividends per share		$175,000 250,000 shares
Dividend yield		$0.70 $35

Comparative Income Statement

Use the following comparative income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Measures part and on the Profitability Measures part. Compute any missing amounts and complete the horizontal analysis columns. Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only at the figure to the right of one decimal place. If < 5, round down and if 5, round up. For example, for 32.048% enter 32.0%. For 32.058% enter 32.1%.

Comparative Income Statement For the Years Ended December 31, 20Y6 and 20Y5

Increase/(Decrease)

20Y6

20Y5

Amount

Percentage

Sales

$fill in the blank 7cb81a02104ff8f_1

$7,257,000

$fill in the blank 7cb81a02104ff8f_2

fill in the blank 7cb81a02104ff8f_3

%

Cost of goods sold

fill in the blank 7cb81a02104ff8f_4

(3,444,000)

fill in the blank 7cb81a02104ff8f_5

fill in the blank 7cb81a02104ff8f_6

%

Gross profit

$fill in the blank 7cb81a02104ff8f_7

$3,813,000

$fill in the blank 7cb81a02104ff8f_8

fill in the blank 7cb81a02104ff8f_9

%

Selling expenses

$fill in the blank 7cb81a02104ff8f_10

$(1,451,000)

$fill in the blank 7cb81a02104ff8f_11

fill in the blank 7cb81a02104ff8f_12

%

Administrative expenses

(1,237,500)

(1,101,500)

fill in the blank 7cb81a02104ff8f_13

fill in the blank 7cb81a02104ff8f_14

%

Total operating expenses

$fill in the blank 7cb81a02104ff8f_15

$(2,552,500)

$fill in the blank 7cb81a02104ff8f_16

fill in the blank 7cb81a02104ff8f_17

%

Operating income

$fill in the blank 7cb81a02104ff8f_18

$1,260,500

$fill in the blank 7cb81a02104ff8f_19

fill in the blank 7cb81a02104ff8f_20

%

Other expense (interest)

fill in the blank 7cb81a02104ff8f_21

(120,600)

fill in the blank 7cb81a02104ff8f_22

fill in the blank 7cb81a02104ff8f_23

%

Income before income tax expense

$fill in the blank 7cb81a02104ff8f_24

$1,139,900

$fill in the blank 7cb81a02104ff8f_25

fill in the blank 7cb81a02104ff8f_26

%

Income tax expense

fill in the blank 7cb81a02104ff8f_27

(178,200)

fill in the blank 7cb81a02104ff8f_28

fill in the blank 7cb81a02104ff8f_29

%

Net income

$fill in the blank 7cb81a02104ff8f_30

$961,700

$fill in the blank 7cb81a02104ff8f_31

fill in the blank 7cb81a02104ff8f_32

%

Final Questions

Your accountant friend reveals that the company whose information you have been working on is actually a company he is thinking of investing in. What advice and insight do you have for your friend?

Using only the information from your horizontal analysis of the comparative income statement, complete the following sentences.

has decreased significantly from 20Y5 to 20Y6, even though has increased. However, has also , which slowed the increase in . In addition, has increased at a faster rate. The company appears .

Based on these observations, do you recommend that your friend invest in this companys stock?