Question
The comparative financial statements prepared at December 31, 2017, for Pinnacle Plus showed the following summarized data: 2017 2016 Income Statement Sales Revenue* $ 124,000
The comparative financial statements prepared at December 31, 2017, for Pinnacle Plus showed the following summarized data:
2017 | 2016 | |||||
Income Statement | ||||||
Sales Revenue* | $ | 124,000 | $ | 113,000 | ||
Cost of Goods Sold | 57,600 | 53,600 | ||||
Gross Profit | 66,400 | 59,400 | ||||
Operating Expenses | 40,200 | 37,200 | ||||
Interest Expense | 3,600 | 3,600 | ||||
Income before Income Tax Expense | 22,600 | 18,600 | ||||
Income Tax Expense (30%) | 6,780 | 5,580 | ||||
Net Income | $ | 15,820 | $ | 13,020 | ||
Balance Sheet | ||||||
Cash | $ | 47,461 | $ | 13,740 | ||
Accounts Receivable, Net | 33,000 | 39,000 | ||||
Inventory | 32,000 | 34,000 | ||||
Property and equipment, Net | 87,000 | 97,000 | ||||
Total Assets | $ | 199,461 | $ | 183,740 | ||
Accounts Payable | $ | 35,781 | $ | 30,180 | ||
Income Tax Payable | 960 | 460 | ||||
Note Payable, Long-Term | 36,000 | 36,000 | ||||
Total Liabilities | 72,741 | 66,640 | ||||
Contributed Capital (9,000 shares) | 90,000 | 90,000 | ||||
Retained Earnings | 36,720 | 27,100 | ||||
Total Liabilities and Shareholders' Equity | $ | 199,461 | $ | 183,740 | ||
*One-half of all sales are on credit. During 2017, cash dividends amounting to $6,200 were declared and paid.
1. Net property and equipment totalled $102,000 at the end of 2015. Compute the fixed asset turnover ratios for 2017 and 2016.
2. After Pinnacle Plus released its 2017 financial statements, the company's shares were trading at $27.80. After the release of its 2016 financial statements, the company's share price was $22.70 per share. Compute the P/E ratios for both years.
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