The condensed balance sheet and income statement data for Finch Corporation are presented below.

Additional information:1. The market price of Finch common stock was $5.00, $3.50, and $2.80 for 2010, 2011, and 2012, respectively.2. You must compute dividends paid. All dividends were paid in cash.Instructions(a) Compute the following ratios for 2011 and 2012.(1) Profit margin.(2) Gross profit rate.(3) Asset turnover.(4) Earnings per share.(5) Price-earnings.(6) Payout.(7) Debt to total assets.(b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in the financial position and operating results from 2011 to 2012 of FinchCorporation.

Transcribed Image Text:

FINCH CORPORATION Balance Sheets December 31 2012 2011 2010 $ 24,000 48,000 $ 20,000 $ 30,000 110,000 80,000 90,000 503,000 Cash Receivables (net) Other current assets 48,000 62,000 50,000 360,000 78,000 Investments 70,000 Plant and equipment (net) 400,000 $813,000 $620,000 $540,000 $ 98,000 $ 75,000 $ 70,000 Current liabilities Long-term debt Common stock, $10 par Retained earnings 130,000 400,000 185,000 75,000 65,000 300,000 105,000 340,000 130,000 $813,000 $620,000 $540,000 FINCH CORPORATION Income Statements For the Years Ended December 31 2012 2011 Sales $800,000 $750,000 Less: Sales returns and allowances 40,000 50,000 Net sales 700,000 406,000 760,000 420,000 Cost of goods sold Gross profit Operating expenses (including income taxes) 340,000 220,000 294,000 204,000 $120,000 $ 90,000 Net income