Problem 1 - Comparative statement data for Farris Company and Ratzlaff Company, two competitors, appear below. All balance sheet data are as of December 31, 2017, and December 31, 2016.
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Farris Company
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Ratzlaff Company
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|
2017
|
2016
|
2017
|
2016
|
|
Net sales
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$1,570,000
|
|
$339,400
|
|
|
Cost of goods sold
|
1,080,000
|
|
241,100
|
|
|
Operating expenses
|
301,200
|
|
80,000
|
|
|
Interest expense
|
8,300
|
|
2,200
|
|
|
Income tax expense
|
54,300
|
|
6,400
|
|
|
Current assets
|
320,000
|
$314,200
|
82,300
|
$78,600
|
|
Plant assets (net)
|
521,700
|
500,000
|
139,200
|
124,500
|
|
Current liabilities
|
65,400
|
74,600
|
36,400
|
30,600
|
|
Long-term liabilities
|
108,400
|
89,800
|
29,200
|
25,400
|
|
Common stock, $10 par
|
498,000
|
498,000
|
117,000
|
117,000
|
|
Retained earnings
|
169,900
|
151,800
|
38,900
|
30,100
|
Prepare a vertical analysis of the 2017 income statement data for Farris Company and Ratzlaff Company in columnar form.
Compute the return on assets and the return on common stockholders' equity ratios for both companies.
Problem 2 - The comparative statements of Painter Tool Company are presented below.
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PAINTER TOOL COMPANY Income Statement For the Years Ended December 31
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|
2017
|
2016
|
|
Net sales
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$1,815,700
|
$1,749,500
|
|
Cost of goods sold
|
1,011,000
|
981,000
|
|
Gross profit
|
804,700
|
768,500
|
|
Selling and administrative expenses
|
515,000
|
477,600
|
|
Income from operations
|
289,700
|
290,900
|
|
Other expenses and losses
|
|
|
|
Interest expense
|
19,000
|
14,300
|
|
Income before income taxes
|
270,700
|
276,600
|
|
Income tax expense
|
80,800
|
76,700
|
|
Net income
|
$ 189,900
|
$ 199,900
|
|
PAINTER TOOL COMPANY Balance Sheets December 31
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|
Assets
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2017
|
2016
|
|
Current assets
|
|
|
|
Cash
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$60,900
|
$63,800
|
|
Short-term investments
|
68,900
|
51,000
|
|
Accounts receivable (net)
|
116,700
|
102,300
|
|
Inventory
|
123,800
|
115,700
|
|
Total current assets
|
370,300
|
332,800
|
|
Plant assets (net)
|
600,600
|
517,800
|
|
Total assets
|
$970,900
|
$850,600
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Current liabilities
|
|
|
|
Accounts payable
|
$159,900
|
$144,200
|
|
Income taxes payable
|
44,000
|
42,600
|
|
Total current liabilities
|
203,900
|
186,800
|
|
Bonds payable
|
202,200
|
202,200
|
|
Total liabilities
|
406,100
|
389,000
|
|
Stockholders' equity
|
|
|
|
Common stock ($5 par)
|
279,200
|
297,100
|
|
Retained earnings
|
285,600
|
164,500
|
|
Total stockholders' equity
|
564,800
|
461,600
|
|
Total liabilities and stockholders' equity
|
$970,900
|
$850,600
|
All sales were on account.
Compute the following ratios for 2017. (Weighted-average common shares in 2017 were 58,400.)
(a) Earnings per share
(b) Return on common stockholders' equity
(c) Return on assets
(d) Current ratio
(e) Acid-test ratio
(f) Accounts receivable turnover
(g) Inventory turnover
(h) Times interest earned
(i) Asset turnover
(j) Debt to assets ratio