Question
The financial statements for Delta Industries for the year ended December 31 st , 2018 are as follows: Delta Industries Statement of Income For the
The financial statements for Delta Industries for the year ended December 31st, 2018 are as follows:
Delta Industries
Statement of Income
For the years ended December 31, 2018 and 2017
|
| 2018 | 2017 |
Sales revenue |
| $351,500 | $310,000 |
Cost of goods sold |
| 201,000 | 155,000 |
Gross margin |
| 150,500 | 155,000 |
Operating expenses: |
| 65,000 | 71,000 |
Operating income |
| 85,500 | 84,000 |
Interest expense |
| 26,000 | 20,000 |
Income before income tax |
| 59,500 | 64,000 |
Income tax expense |
| 19,000 | 22,500 |
Operating income |
| $40,500 | $41,500 |
Delta Industries
Statement of Financial Position
December 31st, 2018 and 2017
| 2018 | 2017 |
Current assets |
|
|
Cash | $21,000 | $25,000 |
Accounts receivable(net) | 116,000 | 80,500 |
Inventory | 149,000 | 137,000 |
Prepaid expenses | 6,000 | 9,000 |
Total current assets | 292,000 | 251,500 |
Property, plan t and equipment (net) | 154,500 | 143,500 |
Total assets | $446,500 | $395,000 |
|
|
|
Current liabilities | $141,000 | $138,500 |
Long-term liabilities | 114,500 | 121,000 |
Total liabilities | 255,500 | 259,500 |
Shareholders equity |
|
|
Preferred shares ($1.50) | 30,000 | 30,000 |
Common shares | 75,000 | 60,000 |
Retained earnings | 86,000 | 45,500 |
Total shareholders equity | 191,000 | 135,500 |
Total liabilities and shareholders equity | $446,500 | $395,000 |
Additional information:
- The market price of Delta Industries common shares was $19.00 on December 31st,2018 and $300 on December 31st, 2017.
- The weighted average of common shares outstanding was 15,000 during 2018 and 12,000 during 2017.
- There are 2,000 preferred shares outstanding
- All sales are on credit
Required:
- Compute the following ratios for 2018 and 2017:
- Current ratio
- Inventory turnover
- Accounts receivable turnover
- Time-interest earned ratio
- Return on assets
- Return on common shareholders equity
- Earnings per common share
- Price-earnings ratio
- Determine whenter Delta Industries ability to pay its debts and to sell inventory improved or deteriorated during 2018.
- Would you be interested in purchasing common shares in Delta Industries? Explain
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