Ratios Compared with Industry Averages Adams Plastics, Inc., manufactures varioas plastic and Financial statement data for the firm follow: 2019 Thousands of Dollars except Earnings per Share) Sales revenue. Cost of goods sold Net income 550,000 50,500 17,500 Earnings per share 4.04 ADAMS PLASTICS, INC Balance Sheets (Thousands of Dollars) Dec. 31, 2019 Dec. 31, 2018 Cash $ 2,100 2,700 60,900 66,900 148,000 140.000 Total current assots.... 217,000 215,000 203,600 194,000 Other assets Total assets 545.800 9401,600 Liabilities and Stockholders' Equity Notes payable-banks 31,400 25,000 23,000 5,100 24,800 72,800 150,000 150,000 27,600 Accrued liabilitios Total current liabilities 10% bonds payable 84,100 Total liabilities... Common stock, $10 par value (12,500,000 shares). Retained earnings 234,100 22,.800 125,000 86.800 53,800 211,800 178,800 $401,600 Total stockholders' equity Total liabilities and stockholders' equity $445,900 Required a. Using the given data, calculate items 1 through 8 below for 2019. Compare the performance of Adams Plastics, Inc., with the following industry averages and comment on its operations Median Ratios for Manufacturers of Plastic and Synthetic Products 1.2 1.9 7.9 times 7 8 times 0.95 1. Quick ratio 2. Current ratio... 3. 4. Inventory turnover.. 5. Deb-to-equity ratio 6. Gross profit percentage 32.7 percent 3.5 percant 6.3 percent Return on assets 8. b. Calculate the dividends paid per share of common stock. What was the dividend payout ratio? c. If the most recent price per share of common stock is $51.00, what is the price-earnings ratio? The dividend yield? Your strategy is to invest in companies that have low price/earnings ratio but appear to be in good shape financially. Assume that you have analyzed all other factors and that your decision depends on the results of ratio analysis. Requirements: Compute the following ratios for Adams Plastics for the current year and put your final answers in the chart below. Show your work on a separate paper for possible partial credit. Decide whether the company's stock better fits your investment strategy than others in the industry and describe in a paragraph your reasons why. Cite specific ratio results in support of your rationale. Would you invest your retirement funds in Adams? 1. 2. RESULTS Industry Average 1.2 1.9 7.9 RATIO Adams Plastics 2019 Acid-test ratio (quick ratio Current Ratio Accounts Receivable turnover Inventory turnover Debt-to-equity ratio Gross margin ratio Return on sales Return on total assets Dividends per share - CS Dividend yield (payout ratio) Earnings per share-CS Price/earnings ratio 7.8 0.95 32.7 % 3.5% 6.3% Analysis and Discussion: Formula Liquidity and Efficioncy Current assots Currene labilitas Current ratio Cash + Short-term investments + Current rocelvablos Curront Babltios Acid-test rato Nat sales Accounts recovable turnover Averago accounts rocalvabla, net Inventory curnover - Cost of goods sold Average Inventory recelvable, nx 365 Not salos Days' sales uncollected Ending inventory Cost of goods sold Not alos Avorage total assets Days salos in invontory Toal assot turnover Solvency Debe ratlo 365 Toal Rablitihs Total assot Toal equity Equicy racko Toal assots Toal babilitios Total equbtY Income before Interost expense and Income taxos Dobe-to-oquity ratio Times interest eamed Interost expense Profitability = Net income Profit margin ratio Gross margin racko Return on tocal assats Not salas Not salos -Cost of goods sold Net salos Not income Avorage total assOts Not Income- Proforred dividends Average common stocholdors' equicy Return on common stockhoiders equity Book value per common share Net income Proferrod didends Walghted-average common shares outstanding Batic oarnings por share Market Prospects Markat prike per common sharo Earnings per share Annual cash dividends per share Market price por sharo Price-earnings ratio Dividond yield
