Question - The following are comparative data for Sunshine State Equipment, Inc., for the 3-year period 2009-2011.
|
Income Statement
|
|
2011
|
2010
|
2009
|
|
Net Sales
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$1,400,000
|
$1,100,000
|
$1,220,000
|
|
Cost of Goods sold
|
760,000
|
600,000
|
610,000
|
|
Gross Profit on sales
|
$640,000
|
$500,000
|
$610,000
|
|
Selling, general, and other expenses
|
340,000
|
280,000
|
250,000
|
|
Income before taxes
|
$300,000
|
$220,000
|
$360,000
|
|
Income taxes
|
120,000
|
89,000
|
152,000
|
|
Net income
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$180,000
|
$131,000
|
$208,000
|
|
Dividends paid
|
155,000
|
150,000
|
208,000
|
|
Net increase (decrease) in retained earnings
|
$25,000
|
$ (19,000)
|
$-
|
|
Balance Sheet Data
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|
2011
|
2010
|
2009
|
|
Assets
|
|
|
|
|
Cash
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$50,000
|
$40,000
|
$75,000
|
|
Accounts receivable (net)
|
300,000
|
320,000
|
250,000
|
|
Inventory
|
380,000
|
420,000
|
350,000
|
|
Prepaid expenses
|
30,000
|
10,000
|
40,000
|
|
Land, Buildings, and equipment (net)
|
760,000
|
600,000
|
690,000
|
|
Intangible assets
|
110,000
|
100,000
|
125,000
|
|
Other assets
|
70,000
|
10,000
|
20,000
|
|
$1,700,000
|
$1,500,000
|
$1,550,000
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
Accts Payable
|
$120,000
|
$185,000
|
$220,000
|
|
Wages, interest, and dividends payable
|
25,000
|
25,000
|
25,000
|
|
Income tax payable
|
29,000
|
5,000
|
30,000
|
|
Miscellaneous current liabilities
|
10,000
|
4,000
|
10,000
|
|
8% bonds payable
|
300,000
|
300,000
|
250,000
|
|
Deferred revenues (long term)
|
10,000
|
10,000
|
25,000
|
|
No-par common stock, $10 stated value
|
500,000
|
400,000
|
400,000
|
|
Additional paid-in capital
|
510,000
|
400,000
|
400,000
|
|
Retained Earnings
|
196,000
|
171,000
|
190,000
|
|
$1,700,000
|
$1,500,000
|
$1,550,000
|
Instructions:
1. From the foregoing data, calculate financial ratios for the three years 2009-2011 as follows (for all ratios using balance sheet amounts, use the end-of-year balance):
(a) Return on equity
(b) Return on sales
(c) Asset turnover
(d) Assets-to-equity ratio
(e) Return on assets
(f) Current ratio
(g) Dividend payout ratio
2. Based on the ratios calculated in (1), evaluate Sunshine State Equipment, Inc., in 2011 as compared with 2010.