The comparative financial statements prepared at December 31, 2010, for Pinnacle Plus showed the following summarized data:

	2010			2009
Income Statement
Sales revenue*	$	110,000		$	99,000
Cost of goods sold		52,000			48,000
Gross profit		58,000			51,000
Operating expenses		36,000			33,000
Interest expense		4,000			4,000
Income before income taxes		18,000			14,000
Income tax expense (30%)		5,400			4,200
Net income	$	12,600		$	9,800
Balance Sheet
Cash	$	49,500		$	18,000
Accounts receivable (net)		37,000			32,000
Inventory		25,000			38,000
Property and equipment (net)		95,000			105,000
Total assets	$	206,500		$	193,000
Accounts payable	$	42,000		$	35,000
Income taxes payable		1,000			500
Note payable, long-term		40,000			40,000
Total liabilities		83,000			75,500
Common stock (par $10)		90,000			90,000
Retained earnings		33,500			27,500
Total liabilities and stockholders' equity	$	206,500		$	193,000

* One-half of all sales are on credit.

During 2010, cash dividends amounting to $6,600 were declared and paid.

Requirement 1:

(a)	Compute the gross profit percentages in 2010 and 2009. (Round your answers to 1 decimal place. Omit the "%" sign in your response.)

	Gross Profit Percentage
2010	%
2009	%

(b)	Is the trend going in the right direction?
	(Click to select) Yes No

Requirement 2:

(a)	Compute the net profit margin for 2010 and 2009. (Round your answers to 1 decimal place. Omit the "%" sign in your response.)

	Net Profit Percentage
2010	%
2009	%

(b)	Is the trend going in the right direction?
	(Click to select) No Yes

Requirement 3:

(a)	Compute the earnings per share for 2010 and 2009. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	Earnings per Share
2010	$
2009	$

(b)	Does the trend look good or bad?
	(Click to select) Good Bad

Requirement 4:

(a)	Stockholders' equity totaled $100,000 at the end of 2008. Compute the return on equity (ROE) ratios for 2010 and 2009. (Round your answers to 1 decimal places. Omit the "%" sign in your response.)

	Return on Equity
2010	%
2009	%

(b)	Is the trend going in the right direction?
	(Click to select) No Yes

Requirement 5:

(a)	Net property and equipment totaled $110,000 at the end of 2008. Compute the fixed asset turnover ratios for 2010 and 2009. (Round your answers to 2 decimal places.)

	Fixed Asset Turnover
2010
2009

(b)	Is the trend going in the right direction?
	(Click to select) No Yes

Requirement 6:

(a)	Compute the debt-to-assets ratios for 2010 and 2009.(Round your answers to 2 decimal places.)

	Debt-to-Assets
2010
2009

(b)	Is debt providing financing for a larger or smaller proportion of the company's asset growth?
	(Click to select) Larger proportion Smaller proportion

Requirement 7:

(a)	Compute the times interest earned ratios for 2010 and 2009. (Round your answers to 1 decimal place.)

	Times Interest Earned
2010
2009

(b)	Do they look good or bad?
	(Click to select) Bad Good

Requirement 8:

(a)	After Pinnacle Plus released its 2010 financial statements, the company's stock was trading at $18. After the release of its 2009 financial statements, the company's stock price was $15 per share. Compute the P/E ratios for both years. (Round your answers to 1 decimal place.)

	Price/Earnings
2010
2009

(b)	Does it appear that investors have become more (or less) optimistic about Pinnacle's future success?
	(Click to select) Less optimistic More optimistic

check my workeBook Links (2)