Question
The comparative balance sheet of Posner Company, for 2010 and the preceding year ended December 31,2009, appears below in condensed form: (year 2010 coming first)
The comparative balance sheet of Posner Company, for 2010 and the preceding year ended December 31,2009, appears below in condensed form: (year 2010 coming first)
Cash 53,000 50,000
Accounts Receivable (net) 37,000 48,000
Inventories 108,500 100,000
Investments ....... 70,000
Equipment 573,200 450,000
Accumulated Depreciation-equipment (142,000) (176,000)
629,700 542000
Accounts payable 62500 43,800
Bonds payable due 2010 ..... 100,000
Common stock $10 par 325,000 285,000
paid in capital in excess of par--common stock 80,000 55,000
retained earnings 162,200 58,200
629700 542000
The income statement for the current year is as follows:
Sales 625700
Cost of merchandise sold 340000
Gross Profit 285700
Operating expenses:
Depreciation expense 26000
other operating expenses 68000 94000
income from operations 191700
other income:
gain on sale of investment 4000
Other expense:
interest expense 6000 (2000)
income before income tax 189700
income tax 60700
net income 129000
Additional data for the current year are as follows:
a) Fully depreciated equipment costing 60,000 was scrapped, no salvage, and equipment was purchased for 183200
b) bonds payable for 100000 were retired by payment at their face amount
c) 5000 shares of common stock were issued at 13 dollars for cash.
d) cash divedends declared and paid, 25000.
1. prepare a statement of cash flows, using the indirect method of reporting cash flows from operating activities.
2. Using the balance sheet from above conduct a horizontal analysis to determine the changes in balance sheet accounts for years 2009 and 2010.
3. Using vertical analysis, compute the following analytical measures for year 2010:
.solvency measures:
current ratio
quick ratio
accounts receivable turnover
inventory turnover
.Profitability measures:
Earnings per share of common stock
dividends per share of common stock
dividend yield
perform any other analysis you feel is appropriate.
Write a brief assessment of the financial condition of this company, based upon the above analytical measures.
Assuming the current market value of common stock is $20 per share, would you recommend purchasing the stock? why or wht not?
please help.
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