Columbia Associates declared and paid a cash dividend of $7,500 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information: Income Statement Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses. Interest Expense Income before Income Tax Expense Income Tax Expense (30%) Net Income Balance Sheet Cash Accounts Receivable, Net Inventory Property and Equipment, Net Total Assets Accounts Payable Income Tax Payable Notes Payable (long-term) Total Liabilities Common Stock (par $10) Retained Earnings Total Liabilities and Stockholders' Equity Current Year Previous Year $ 155,000 70,000 85,000 45,000 4,900 ginning 35,100 10,530 $ 24,570 $ 81,245 26,000 34,000 104,000 $ 245,245 $ 51,000 1,225 49,000 101,225 95,400 48,620 $ 245,245 $ 135,000 66,000 69,000 40,200 4,900 23,900 7,170 $ 16,730 $ 29,000 21,000 47,000 114,000 $ 211,000 $ 34,100 950 49,000 84,050 95,400 31,550 $ 211,000 Required: 1. Compute the gross profit percentage in the current and previous years. Are the current-year results better, or worse, than those for the previous year? 2. Compute the net profit margin for the current and previous years. Are the current-year results better, or worse, than those for the previous year? 3. Compute the earnings per share for the current and previous years. Are the current-year results better, or worse, than those for the previous year? Stockholders' OGL u totaled $100.000 ious von Compute the return 305) ration for the
Columbia Associates declared and paid a cash dividend of $7,500 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information: Income Statement Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses. Interest Expense Income before Income Tax Expense Income Tax Expense (30%) Net Income Balance Sheet Cash Accounts Receivable, Net Inventory Property and Equipment, Net Total Assets Accounts Payable Income Tax Payable Notes Payable (long-term) Total Liabilities Common Stock (par $10) Retained Earnings Total Liabilities and Stockholders' Equity Current Year Previous Year $ 155,000 70,000 85,000 45,000 4,900 ginning 35,100 10,530 $ 24,570 $ 81,245 26,000 34,000 104,000 $ 245,245 $ 51,000 1,225 49,000 101,225 95,400 48,620 $ 245,245 $ 135,000 66,000 69,000 40,200 4,900 23,900 7,170 $ 16,730 $ 29,000 21,000 47,000 114,000 $ 211,000 $ 34,100 950 49,000 84,050 95,400 31,550 $ 211,000 Required: 1. Compute the gross profit percentage in the current and previous years. Are the current-year results better, or worse, than those for the previous year? 2. Compute the net profit margin for the current and previous years. Are the current-year results better, or worse, than those for the previous year? 3. Compute the earnings per share for the current and previous years. Are the current-year results better, or worse, than those for the previous year? Stockholders' OGL u totaled $100.000 ious von Compute the return 305) ration for the
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Columbia Associates declared and paid a cash dividend of $7,500 in the current year. Its comparative financial statements, prepared at
December 31, reported the following summarized information:
Income Statement
Sales Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses
Interest Expense
Income before Income Tax Expense
Income Tax Expense (30 %)
Net Income
Balance Sheet
Cash
Accounts Receivable, Net
Inventory
Property and Equipment, Net
Total Assets
Accounts Payable
Income Tax Paya
Notes Payable (long-term)
Total Liabilities
Common Stock (par $10)
Retained Earnings
Total Liabilities and Stockholders' Equity
Current Year Previous Year
$ 155,000
70,000
85,000
45,000
4,900
35,100
10,530
$ 24,570
$ 81,245
26,000
34,000
104,000
$ 245,245
$ 51,000
1,225
49,000
101,225
95,400
48,620
$ 245,245
$ 135,000
66,000
69,000
40,200
4,900
23,900
7,170
$ 16,730
$ 29,000
21,000
47,000
114,000
$ 211,000
$ 34,100
950
49,000
84,050
95,400
31,550
$ 211,000
Required:
1. Compute the gross profit percentage in the current and previous years. Are the current-year results better, or worse, than those for
the previous year?
2. Compute the net profit margin for the current and previous years. Are the current-year results better, or worse, than those for the
previous year?
3. Compute the earnings per share for the current and previous years. Are the current-year results better, or worse, than those for the
previous year?
4. Stockholders' equity totaled $109,000 at the beginning of the previous year. Compute the return on equity (ROE) ratios for the
current and previous years. Are the current-year results better, or worse, than those for the previous year?
5. Net property and equipment totaled $119,000 at the beginning of the previous year. Compute the fixed asset turnover ratios for the
current and previous years. Are the current-year results better, or worse, than those for the previous year?
6. Compute the debt-to-assets ratios for the current and previous years. Is debt providing financing for a larger or smaller proportion of
the company's asset growth?
7. Compute the times interest earned ratios for the current and previous years. Are the current-year results better, or worse, than those
for the previous year?
8. After Columbia Associates released its current year's financial statements, the company's stock was trading at $27. After the release
of its previous year's financial statements, the company's stock price was $24 per share. Compute the P/E ratios for both years.
Does it appear that investors have become more (or less) optimistic about Columbia's future success?
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