The comparative financial statements prepared at December 31 for Pinnacle Plus showed the following summarized data: Current Year Previous Year Income Statement Sales Revenue Cost of Goods Sold $125,000 58,000 $111,000 54,000 Gross Profit Operating Expenses Interest Expense 67,000 39,000 4,300 57,000 35,400 4.300 Income before Income Tax Expense Income Tax Expense (30%) 23,700 7,110 17,300 5,190 Net Income $ 16,590 $ 12,110 Balance Sheet Cash Accounts Receivable, Net Inventory Property and Equipment, Net $ 73,415 20,000 28,000 98,000 $ 35,000 15,000 41,000 108,000 Total Assets $219,415 $199,000 Accounts Payable Income Tax Payable Note Payable (long-term) $ 45,000 1,075 43,000 $ 34,700 650 43,000 Total Liabilities Common Stock (par $10) Retained Earningst Total Liabilities and Stockholders' Equity 89,075 91,800 38,540 78,350 91,800 28,850 $219,415 $199,000 During the current year, cash dividends amounting to $6,900 were declared and paid. Required: 1-a. Compute the gross profit percentage in the current and previous years. (Round your answers to 1 decimal place.) Gross Profit Percentage Current Year Previous Year % 1-b. Are the current year results better, or worse, than those for the previous year? Better Worse 2-a. Compute the net profit margin for the current and previous years. (Round your answers to 1 decimal place.) Net Profit Margin Current Year Previous Year % 2-b. Are the current year results better, or worse, than those for the previous year? Better Worse 3-a. Compute the earnings per share for the current and previous years. (Round your answers to 2 decimal places.) Earnings per Share Current Year Previous Year 3-b. Are the current year results better, or worse, than those for the previous year? Better Worse 4-a. Stockholders' equity totaled $103,000 at the beginning of the previous year. Compute the return on equity (ROE) ratios for the current and previous years. (Round your answers to 1 decimal place.) 4-a. Stockholders' equity totaled $103,000 at the beginning of the previous year. Compute the return on equity (ROE) ratios for the current and previous years. (Round your answers to 1 decimal place.) Return on Equity Current Year Previous Year 4-b. Are the current year results better, or worse, than those for the previous year? Better O Worse 5-a. Net property and equipment totaled $113,000 at the beginning of the previous year. Compute the fixed asset turnover ratios for the current and previous years. (Round your answers to 2 decimal places.) Fixed Asset Turnover Current Year Previous Year 5-b. Are the current year results better, or worse, than those for the previous year? Better Worse 6-a. Compute the debt-to-assets ratios for the current and previous years. (Round your answers to 2 decimal places.) Debt-to-Assets Current Year Previous Year 6-b. Is debt providing financing for a larger or smaller proportion of the company's asset growth? Larger Proportion Smaller Proportion 7-a. Compute the times interest earned ratios for the current and previous years. (Round your answers to 1 decimal place.) Times Interest Earned Current Year Previous Year 7-b. Are the current year results better, or worse, than those for the previous year? Better Worse 8-a. After Pinnacle Plus released its current year's financial statements, the company's stock was trading at $21. After the release of its previous year's financial statements, the company's stock price was $18 per share. Compute the P/E ratios for both years. (Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place.) Price/Earnings Ratio Current Year Previous Year 8-b. Does it appear that investors have become more (or less) optimistic about Pinnacle's future success? More Optimistic Less Optimistic
