Ratios Compared with Industry Averages

Adams Plastics, Inc., manufactures various plastic and synthetic products. Financial statement data for the firm follow:

Current Year

$($Thousands of Dollars,

Except Earnings per Share$)$

Sales revenue $$825,000$

Cost of goods sold $550,000$

Net income $50,500$

Dividends $17,500$

Earnings per share $4\mathrm{.}04$

Adams Plastics, inc.

Balance Sheets

$($Thousands of Dollars$)$

Dec. $31,$

Current Year Dec. $31,$

Previous Year

Assets

Cash $$2,100$ $$2,700$

Accounts receivable $($net$)66,90060,900$

Inventory $148,000140,000$

Total Current Assets $217,000203,600$

Plant assets $($net$)215,000194,000$

Other assets $13,9004,000$

Total Assets $$445,900$ $$401,600$

Liabilities and Stockholders$$ Equity

Notes payable$$banks $$31,400$ $$25,000$

Accounts payable $27,60023,000$

Accrued liabilities $25,10024,800$

Total Current Liabilities $84,10072,800$

$10\%$ Bonds payable $150,000150,000$

Total Liabilities $234,100222,800$

Common stock, $$10$ par value $(12,500,000$ shares$)125,000125,000$

Retained earnings $86,80053,800$

Total Stockholders$$ Equity $211,800178,800$

Total Liabilities and Stockholders$$ Equity $$445,900$ $$401,600$

Required

a$.$ Using the given data, calculate items $1$ through $8$ below for the current year. Compare the performance of Adams Plastics, Inc., with the following industry averages and comment on its operations.

Round all answers to two decimal places.

Median Ratios for

Manufacturers of Plastic and

Synthetic Products

Ratios for

Packard Plastics

$1.$ Quick ratio: $1\mathrm{.}20$ Answer

$0$

$2.$ Current ratio: $1\mathrm{.}90$ Answer

$0$

$3.$ Accounts Receivable Turnover: $7\mathrm{.}90$ Answer

$0$

$4.$ Inventory turnover: $7\mathrm{.}80$ Answer

$0$

$5.$ Debt$-$to$-$equity ratio: $0\mathrm{.}95$ Answer

$0$

$6.$ Gross profit percentage $32\mathrm{.}70\%$ Answer

$0$

$\%$

$7.$ Return on sales $3\mathrm{.}50\%$ Answer

$0$

$\%$

$8.$ Return on assets: $6\mathrm{.}30\%$ Answer

$0$

$\%$

b$.$ Calculate the dividends paid per share of common stock. $($Note: Number of shares shown on balance sheet is not shown in thousands. The number of shares $"$in thousands" is $12,500.)$

Round answers to two decimal places.

$Answer

$1\mathrm{.}4$

What was the dividend payout ratio?

Answer

$34\mathrm{.}65$

$\%$

c$.$ If the most recent price per share of common stock is $$51\mathrm{.}00,$ what is the price$-$earnings ratio?

Round answers to two decimal places.

Answer

$12\mathrm{.}62$

The dividend yield?

Answer

$2\mathrm{.}75$

$\%$