problem: Comparative financial statement information for Arthur Corp. and Lancelot Corp., two competitors, appear below. All balance sheet information are as of December 31, 2007.
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Arthur Corporation
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Lancelot Corporation
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2007
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2007
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Net sales
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$1,950,000
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$620,000
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Cost of goods sold
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1,175,000
|
340,000
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Operating expenses
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303,000
|
98,000
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Interest expense
|
9,000
|
3,800
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Income tax expense
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85,000
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36,000
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Current assets
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427,200
|
190,336
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Plant assets (net)
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532,000
|
139,728
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Current liabilities
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66,325
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35,348
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Long-term liabilities
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108,500
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29,620
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Additional information:
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|
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Cash from operating activities
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$148,000
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$36,000
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Capital expenditures
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$90,000
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$20,000
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Dividends paid
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$36,000
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$15,000
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Average number of shares outstanding
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100,000
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50,000
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Instructions;
[A] prepare comment on the relative profitability of the companies by calculating net income and earnings / share for each company for 2007.
[B] prepare comment on the relative liquidity of the companies by calculating working capital and the current ratios for each company for 2007.
[C] prepare comment on the relative solvency of the companies by calculating debt to total assets ratio and the free cash flow for every company for 2007.