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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.

 

Arthur Corporation

Lancelot Corporation

 

2007

2007

Net sales

$1,950,000

$620,000

Cost of goods sold

1,175,000

340,000

Operating expenses

303,000

98,000

Interest expense

9,000

3,800

Income tax expense

85,000

36,000

Current assets

427,200

190,336

Plant assets (net)

532,000

139,728

Current liabilities

66,325

35,348

Long-term liabilities

108,500

29,620

Additional information:

   

Cash from operating activities

$148,000

$36,000

Capital expenditures

$90,000

$20,000

Dividends paid

$36,000

$15,000

Average number of shares outstanding

100,000

50,000

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.

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M922682

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