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The following financial statements apply to Karl Company: 2019 2018 Revenues Net sales $ 420,000 $ 350,000 Other revenues 16,000 10,000 Total revenues 436,000 360,000

The following financial statements apply to Karl Company:

2019 2018
Revenues
Net sales $ 420,000 $ 350,000
Other revenues 16,000 10,000
Total revenues 436,000 360,000
Expenses
Cost of goods sold 252,000 206,000
Selling expenses 42,000 38,000
General and administrative expenses 22,000 20,000
Interest expense 6,000 6,000
Income tax expense 42,000 36,000
Total expenses 364,000 306,000
Net income $ 72,000 $ 54,000
Assets
Current assets
Cash $ 8,000 $ 16,000
Marketable securities 2,000 2,000
Accounts receivable 70,000 64,000
Inventories 200,000 192,000
Prepaid expenses 6,000 4,000
Total current assets 286,000 278,000
Plant and equipment (net) 210,000 210,000
Intangibles 40,000 0
Total assets $ 536,000 $ 488,000
Liabilities and Stockholders Equity
Liabilities
Current liabilities
Accounts payable $ 80,000 $ 108,000
Other 34,000 30,000
Total current liabilities 114,000 138,000
Bonds payable 132,000 134,000
Total liabilities 246,000 272,000
Stockholders equity
Common stock (100,000 shares) 230,000 230,000
Retained earnings 60,000 (14,000 )
Total stockholders equity 290,000 216,000
Total liabilities and stockholders equity $ 536,000 $ 488,000

Required

Calculate the following ratios for 2018 and 2019. Since 2017 numbers are not presented, do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018 balance sheet.

  1. Net margin. (Round your answers to 2 decimal places.)
  2. Return on investment. (Round your answers to 2 decimal places.)
  3. Return on equity. (Round your answers to 2 decimal places.)
  4. Earnings per share. (Round your answers to 2 decimal places.)
  5. Price-earnings ratio (market prices at the end of 2018 and 2019 were $11.88 and $9.54, respectively). (Round your intermediate calculations and final answers to 2 decimal places.)
  6. Book value per share of common stock. (Round your answers to 2 decimal places.)
  7. Times interest earned. Exclude extraordinary income in the calculation as they cannot be expected to recur and, therefore, will not be available to satisfy future interest payments. (Round your answers to 2 decimal places.)
  8. Working capital.
  9. Current ratio. (Round your answers to 2 decimal places.)
  10. Quick (acid-test) ratio. (Round your answers to 2 decimal places.)
  11. Accounts receivable turnover. (Round your answers to 2 decimal places.)
  12. Inventory turnover. (Round your answers to 2 decimal places.)
  13. Debt to equity ratio. (Round your answers to 2 decimal places.)
  14. Debt to assets ratio. (Round your answers to the nearest whole percent.)
2019 2018
a. Net margin 17.14 % 15.43 %
b. Return on investment 14.06 % 11.07 %
c. Return on equity 28.46 % 25.00 %
d. Earnings per share $0.72 $0.54
e. Price-earnings ratio 13.25 times 22.00 times
f. Book value $2.90
g. Interest earned 20.00 times 16.00 times
h. Working capital $172,000 $140,000
i. Current ratio 2.51 2.01
j. Quick (acid-test) ratio
k. Accounts receivable turnover times 5.47 times
l. Inventory turnover times 1.07 times
m. Debt to equity ratio
n. Debt to assets ratio 46 % 56 %

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