Question
The following financial information is for Wildhorse Company. WILDHORSE COMPANY Balance Sheets December 31 Assets 2017 2016 Cash $ 71,000 $ 67,000 Debt investments (short-term)
The following financial information is for Wildhorse Company.
WILDHORSE COMPANY Balance Sheets December 31 | ||||
---|---|---|---|---|
Assets | 2017 | 2016 | ||
Cash | $ 71,000 | $ 67,000 | ||
Debt investments (short-term) | 53,000 | 40,000 | ||
Accounts receivable | 107,000 | 92,000 | ||
Inventory | 239,000 | 168,000 | ||
Prepaid expenses | 30,000 | 22,000 | ||
Land | 130,000 | 130,000 | ||
Building and equipment (net) | 263,000 | 185,000 | ||
Total assets | $893,000 | $704,000 | ||
Liabilities and Stockholders Equity | ||||
Notes payable | $171,000 | $104,000 | ||
Accounts payable | 67,000 | 55,000 | ||
Accrued liabilities | 41,000 | 41,000 | ||
Bonds payable, due 2017 | 251,000 | 172,000 | ||
Common stock, $10 par | 200,000 | 200,000 | ||
Retained earnings | 163,000 | 132,000 | ||
Total liabilities and stockholders equity | $893,000 | $704,000 |
WILDHORSE COMPANY Income Statements For the Years Ended December 31 | ||||
---|---|---|---|---|
2017 | 2016 | |||
Sales revenue | $ 893,000 | $ 793,000 | ||
Cost of goods sold | 644,000 | 575,000 | ||
Gross profit | 249,000 | 218,000 | ||
Operating expenses | 190,000 | 161,000 | ||
Net income | $ 59,000 | $ 57,000 |
Additional information:
1. | Inventory at the beginning of 2016 was $ 115,000. | |
2. | Accounts receivable (net) at the beginning of 2016 were $ 89,000. | |
3. | Total assets at the beginning of 2016 were $ 637,000. | |
4. | No common stock transactions occurred during 2016 or 2017. | |
5. | All sales were on account. |
(a1) Compute the liquidity and profitability ratios of Wildhorse Company for 2016 and 2017. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%. If % change is a decrease show the numbers as negative, e.g. -1.83% or (1.83%).)
2016 | 2017 | % Change | |||||||
---|---|---|---|---|---|---|---|---|---|
LIQUIDITY | |||||||||
Current ratio | enter the current ratio | :1 | enter the current ratio | :1 | enter percentages | % | |||
Accounts receivables turnover | enter accounts receivables turnover in times | times | enter accounts receivables turnover in times | times | enter percentages | % | |||
Inventory turnover | enter inventory turnover in times | times | enter inventory turnover in times | times | enter percentages | % |
2016 | 2017 | % Change | |||||||
---|---|---|---|---|---|---|---|---|---|
PROFITABILITY | |||||||||
Profit margin | enter percentages | % | enter percentages | % | enter percentages | % | |||
Asset turnover | times | times | %enter percentages % | ||||||
Return on assets | enter percentages | % | enter percentages | % | enter percentages | % | |||
Earnings per share | $ enter a dollar amount | $ enter a dollar amount | enter percentages | % |
(b) Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2017, and (2) as of December 31, 2018, after giving effect to the situation. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%. If % change is a decrease show the numbers as negative, e.g. -1.83% or (1.83%).)
Situation | Ratio | |||
---|---|---|---|---|
1. |
20,000 shares of common stock were sold at par on July 1, 2018. Net income for 2018 was $ 55,000. | Return on common stockholders equity | ||
2.
| All of the notes payable were paid in 2018. All other liabilities remained at their December 31, 2017 levels. Total assets on December 31, 2018, were $ 890,000. | Debt to assets ratio | ||
3. | The market price of common stock was $ 9 and $ 12 on December 31, 2017 and 2018, respectively. | Price-earnings ratio |
2017 | 2018 | % Change | |||||||
---|---|---|---|---|---|---|---|---|---|
Return on common stockholders equity | enter percentages | % | enter percentages | % | enter percentages | % | |||
Debt to assets ratio | enter percentages | % | enter percentages | % | enter percentages | % | |||
Price earnings ratio | enter a price earnings ratio in times | times | enter a price earnings ratio in times | times | enter percentages | % |
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