The following are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2022, and (2) as of December 31, 2023, after giving effect to the situation. (Round debt to assets ratio to decimal places, eg. 15% and other answers to 1 decimal place, eg. 6.8 or 6.8%) (1) Situation 24,120 shares of common stock were sold at par on July 1, 2023. Net income for 2023 was $ 72,360, and there were no dividends. All of the notes payable were paid in 2023. All other liabilities remained at their December 31, 2022, levels. At December 31, 2023, total assets were $ 1.206,000. The market price of common stock was $ 12 and $ 16 on December 31, 2022 and 2023, respectively, Net income for 2023 was $ 72,360. (Use a simple average calculation for EPS.) Ratio Return on common stockholders' equity Debt to assets ratio (2) (3) Price earnings ratio 2022 2023 Return on common stockholders' equity % % Debt to assets ratio % %6 Price-earnings ratio times times The following financial information is for Pharoah Company. Pharoah Company Balance Sheets December 31 Assets 2022 2021 Cash $ 93,800 $ 87,100 Debt investments (short-term) 73,700 53,600 Accounts receivable (net) 139,360 120,600 Inventory 308,200 221,100 Prepaid expenses 33,500 30.820 Land 174,200 174,200 Building and equipment (net) 348,400 247.900 Total assets $ 1,171,160 $935,320 Liabilities and Stockholders' Equity Notes payable (current) $ 227,800 $ 160,800 Accounts payable 87,100 69,680 Accrued liabilities 53,600 53,600 Total assets $ 1,171,160 $935,320 Liabilities and Stockholders' Equity Notes payable (current) $227,800 $ 160,800 Accounts payable 87,100 69,680 Accrued liabilities 53,600 53,600 Bonds payable, due 2025 335,000 227,800 Common stock, $10 par 268,000 268,000 Retained earnings 199,660 155,440 Total liabilities and stockholders' equity $ 1,171,160 $935,320 Pharoah Company Income Statement For the Years Ended December 31 2022 2021 Net sales $ 1,181,880 $ 1,058,600 857,600 770,500 Cost of goods sold Gross profit 324,280 288,100 Operating expenses 254,600 223,780 Pharoah Company Income Statement For the Years Ended December 31 2022 2021 Net sales $ 1,181,880 $ 1,058,600 Cost of goods sold 857,600 770,500 Gross profit 324,280 288,100 Operating expenses 254,600 223,780 Net income $ 69,680 $ 64,320 Additional information: 1. 2. Inventory at the beginning of 2021 was $ 154,100. Accounts receivable (net) at the beginning of 2021 were $ 115,240. Total assets at the beginning of 2021 were $ 884,400. No common stock transactions occurred during 2021 or 2022. 3. 4. 5. All sales were on credit. Indicate, by using ratios, the change in liquidity and profitability of Pharoah Company from 2021 to 2022. (Round Current ratio, Asset turnover and Earnings per share to 2 decimal places, eg. 1.65, and all other answers to 1 decimal place, eg. 6.8 or 6.8%) 2021 2022 LIQUIDITY 1.76 :1 :1 Current ratio 1.81 8.3 times times 9.09 Accounts receivable turnover 4,1 times 3.2 Inventory turnover times PROFITABILITY 5.9 % % 6.1 Profit margin 112 times 1.16 times Asset turnover 6.6 % 7.1 % Return on assets 2.4 $ 26 Earnings per share
