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