1. Compute and interpret liquidity, solvency, and profitability ratios.
2. Condensed balance sheet and income statement data for Danke Corporation are presented as follows.
DANKE CORPORATION
Balance Sheets
December 31
Assets 2017 2016 Cash $ 28,000 $ 20,000 Receivables (net) 70,000 62,000 Other current assets 90,000 73,000 Long-term investments 62,000 60,000 Property, plant, and equipment (net) 510,000 470,000 Total assets $760,000 $685,000 Liabilities and Stockholders' Equity Current liabilities $ 75,000 $ 70,000 Long-term liabilities 80,000 90,000 Common stock 330,000 300,000 Retained earnings 275,000 225,000 Total liabilities and stockholders' equity $760,000 $685,000
DANKE CORPORATION
Income Statements
For the Years Ended December 31 2017 2016 Sales revenue $750,000 $680,000 Cost of goods sold 440,000 400,000 Operating expenses (including income taxes) 240,000 220,000 Net income $ 70,000 $ 60,000
Additional information:
| Net cash provided by operating activities |
$82,000 |
$56,000 |
| Cash used for capital expenditures |
$45,000 |
$38,000 |
| Dividends paid |
$20,000 |
$15,000 |
| Weighted-average number of shares outstanding |
33,000 |
30,000 |
Instructions
Compute these values and ratios for 2016 and 2017.
(a) Earnings per share.
(b) Working capital.
(c) Current ratio.
(d) Debt to assets ratio.
(e) Free cash flow.
(f) Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2016 to 2017 of Danke Corporation.