Question
The financial statements of Hainz Company appear below: HAINZ COMPANY Comparative Balance Sheet December 31, Assets 2017 2016 Cash................................................................................................... $20,000$40,000 Short-term investments..................................................................... 20,00060,000 Accounts receivable
The financial statements of Hainz Company appear below:
HAINZ COMPANY
Comparative Balance Sheet
December 31,
Assets20172016
Cash................................................................................................... $20,000$40,000
Short-term investments..................................................................... 20,00060,000
Accounts receivable (net).................................................................. 40,00030,000
Inventory............................................................................................ 60,00070,000
Property, plant and equipment (net).................................................. 260,000300,000
Total assets ................................................................................ $400,000$500,000
Liabilities and stockholders' equity
Accounts payable.............................................................................. $20,000$30,000
Short-term notes payable.................................................................. 40,00090,000
Bonds payable................................................................................... 80,000160,000
Common stock................................................................................... 150,000150,000
Retained earnings.............................................................................. 110,00070,000
Total liabilities and stockholders' equity...................................... $400,000$500,000
HAINZ COMPANY
Income Statement
For the Year Ended December 31, 2017
Net sales............................................................................................ $400,000
Cost of goods sold............................................................................. 250,000
Gross profit........................................................................................ 150,000
Expenses
Operating expenses..................................................................... $42,000
Interest expense.......................................................................... 18,000
Total expenses...................................................................... 60,000
Income before income taxes............................................................. 90,000
Income tax expense.......................................................................... 27,000
Net income......................................................................................... $63,000
Additional information:
a.Cash dividends of $23,000 were declared and paid in 2017.
b.Weighted-average number of shares of common stock outstanding during 2017 was 30,000 shares.
c.Market value of common stock on December 31, 2017, was $21 per share.
Instructions
Using the financial statements and additional information, compute the following ratios for Hainz Company for 2017. Show all computations.
Computations
1.Current ratio _________.
2.Return on common stockholders' equity _________.
3.Price-earnings ratio _________.
4.Acid-test ratio _________.
5.Accounts receivable turnover _________.
6.Times interest earned _________.
7.Profit margin _________.
8.Days in inventory _________.
9.Payout ratio _________.
10.Return on assets _________.
6 Solution
1.Current ratio
2.Return on common stockholders' equity
3.Price-earnings ratio
4.Acid-test ratio
5.Accounts receivable turnover
6.Times interest earned
7.Profit margin
8.Days in inventory
9.Payout ratio
10.Return on assets
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