736 Chapter 15 Financial Statement Analysis
instructions (a) Prepare a vertical analysis of the 2009 income statement data for Logsdon Company and Waitlin Company in columnar form. (b) 444449, Comment on the relative profitability of the companies by computing the return 011. assets and the return on common stockholders' equity ratios for both companies.
Compute ratios from balance P15-2 The comparative statements of Villa Tool Company are presented below. sheet and income statement
(SO 5)
VILLA TOOL COMPANY income Statement For the Year Ended December 31
Net sales Cost of goods sold
2009 2008
$1,81.8,500 $1,750,500 1.,01.1,500 996,000
Gross profit 807,001) 754,5()() Selling and administrative expense 516,014 479,000
Income from operations Other expenses and losses Interest expense
291,000 275,500
18,000 14,000
Income before income taxes 273,000 261,500 Income tax expense 81,000 77,001)
Net income $ 192,000 $ 184,500
VILLA TOOL COMPANY Balance Sheets December 31
Assets
Current assets Cash Short-term investments Accounts receivable (net) Inventory Total current assets Plant assets (net) 'Fotal assets
2009 2008
.$ 60,1.00 69,000 1.17,800 1.23,000
369,900 600,300 520,300 $970,200 $852,800
S 64,200 50,001) 102,801) 1.15,500 332,500
Liabilities and Stockholders' Equity Current liabilities Accounts payable $160,000 • $145,4(30 Income taxes payable 43,500 42,000 Total current liabilities 203,500 187,400 Bonds payable 200.001) 200,000
Total liabilities 403,500 387,400 Stockholders' equity Common stock ($5 par) 280,000 300,000 Retained earnings 286,700 165,400 Total stockholders' equity 566,700 465,400 Total liabilities and stockholders' equity $970,200 $852,800
All sales were on account. The allowance for doubtful accounts was $3,200 on December 31, 2009, and $3,000 on December 31, 2008.
Instructions Compute the following ratios for 2009. (Weighted-average-common shares in 2009 were 57,000.) (a) Earnings per share. (1) Receivables turnover.
(b) Return on common stockholders' equity. (c) Return on assets. (d) Current. (e) Acid-test.
(g) Inventory turnover. (h) Times interest earned. (i) Asset turnover. (j) Debt to total assets.
P15-3 Financial information for lianshew Company is presented below.
HANSHEW COMPANY Balance Sheets December 31
Assets
Cash Short-term investments Receivables (net) Inventories Prepaid expenses Land Building and equipment (net)
Liabilities and Stockholders' Equity
Notes payable Accounts payable Accrued liabilities Bonds payable, due 2012 Common stock, $10 par Retained earnings
2009 2008
$ 70,000 $ 65,000 52,000 40,01)0 98,000 80,000 1.25,000 135,000 29,000 23,000 1.30,000 1.30,000 180,000 1.75,000
$684,000 $648,000
1.00,000 48,000 50.000 150,000 200.000 136,000
$684,000
HANSHEW COMPANY Income Statement For the Years Ended December 31
Sales Cost of goods sold Gross profit Operating expenses Net income
2009 $850,000 620,000 230,000 187,000
$ 43,1)1)0
2008 $790,000 575,000 215,000 173,1)01) $ 42,000
$1.00,000 42,000 40,000 150,000. 200,000 116,000 $648,000
Additional information: 1. Inventory at the beginning of 2008 was $1.1.8,000. 2. Receivables (net) at the beginning of 2008 were $88,000. The allowance for doubtful accounts was $4,000 at the end of 2009, $3,800 at the end of 2008, and $3,701) at the beginning of 2008. 3, Total. assets at th.e beginning of 2008 were $630,000. 4. No common stock transactions occurred during 2008 or 2009. 5, All sales were on account.
Instructions (a) Indicate, by using ratios, the change in liquidity and profitability of Hanshew Company 2008 to 2009. (Note: Not all profitability ratios can be computed.)
Problems 737
Compute ratios, and comment on overall liquidity and profitability. (SO 5)