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
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 $6,600 were declared and paid.
Requirement 1:
(a)
Compute the gross profit percentages in 2010 and 2009. (Round your answers to 1 decimal place. Omit the "%" sign in your response.)
Gross Profit Percentage
2010
%
2009
%
(b)
Is the trend going in the right direction?
Requirement 2:
(a)
Compute the net profit margin for 2010 and 2009. (Round your answers to 1 decimal place. Omit the "%" sign in your response.)
Net Profit Percentage
2010
%
2009
%
(b)
Is the trend going in the right direction?
Requirement 3:
(a)
Compute the earnings per share for 2010 and 2009. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Earnings per Share
2010
$
2009
$
(b)
Does the trend look good or bad?
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?
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?
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?
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?
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?
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