**Otis Company Financial Analysis**Otis Company's income statement information follows:**Income Statement Data:**- **Net sales (excluding interest and taxes)**: - Year 3: $480,000 - Year 2: $392,000- **Net income (after taxes)**: - Year 3: $81,000 - Year 2: $72,000- **Interest expense**: - Year 3: $9,000 - Year 2: $9,000- **Stockholders' equity (December 31)**: - Year 3: $260,000 - Year 2: $240,000- **Common stock (December 31)**: - Year 3: $200,000 - Year 2: $200,000The average number of shares outstanding was 96,000 for Year 3 and 80,000 for Year 2.**Required:**Compute the following ratios for Otis for Year 3 and Year 2.a. **Number of times interest was earned**: - Round your answers to 2 decimal places.b. **Earnings per share**: - Based on the average number of shares outstanding, round to 2 decimal places.c. **Price-earnings ratio**: - Market price (Year 3: $64 per share; Year 2: $78 per share). Round answers to 2 decimal places.d. **Return on average equity**: - Round your answers to 2 decimal places.e. **Net margin**: - Round your answers to 2 decimal places.**Financial Ratios Table:**| Ratio | Year 3 | Year 2 ||-----------------------------|--------------|--------------|| **a. Times interest earned**| | || **b. Earnings per share** | | || **c. Price-earnings ratio** | | || **d. Return on average equity**| | || **e. Net margin** | | |This task requires calculating several financial ratios to analyze Otis Company's performance over two years. Use the provided financial data to compute and compare these ratios. Ensure that all final answers are rounded to 2 decimal places as instructed.

Ratio analysis includes computation of financial ratios to compare for two or more periods or…

Otis Company's income statement information follows: Year 3 Year 2 Net sales $480,000 $320,000 Income before interest and taxes 000'86 000'ZL 000'8 Net income after taxes Interest expense 000'18 000'6 000'008 Stockholders' equity, December 31 (Year 1: $200,000) Common stock, December 31 000'0BZ 000'00z 240,000 The average number of shares outstanding was 9,600 for Year 3 and 8,000 for Year 2 Required Compute the following ratios for Otis for Year 3 and Year 2. a. Number of times interest was earned. (Round your answers to 2 decimal places.) b. Earnings per share based on the average number of shares outstanding. (Round your answe c. Price-earnings ratio (market prices: Year 3. $64 per share; Year 2, $78 per share). (Round inte answers to 2 decimal places.) d. Return on average equity. (Round your answers to 2 decimal places. (i.e., .2345 should be e. Net margin. (Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23 Year 3 Year 2 13.33 times 12.25 times a. Times interest earned 00 6 8.67 times 8.44 b. Earnings per share 7.59 times c. Price-earnings ratio d. Return on average equity e. Net margin

Otis Company's income statement information follows: Year 3 Year 2 Net sales $480,000 $320,000 Income before interest and taxes 000'86 000'ZL 000'8 Net income after taxes Interest expense 000'18 000'6 000'008 Stockholders' equity, December 31 (Year 1: $200,000) Common stock, December 31 000'0BZ 000'00z 240,000 The average number of shares outstanding was 9,600 for Year 3 and 8,000 for Year 2 Required Compute the following ratios for Otis for Year 3 and Year 2. a. Number of times interest was earned. (Round your answers to 2 decimal places.) b. Earnings per share based on the average number of shares outstanding. (Round your answe c. Price-earnings ratio (market prices: Year 3. $64 per share; Year 2, $78 per share). (Round inte answers to 2 decimal places.) d. Return on average equity. (Round your answers to 2 decimal places. (i.e., .2345 should be e. Net margin. (Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23 Year 3 Year 2 13.33 times 12.25 times a. Times interest earned 00 6 8.67 times 8.44 b. Earnings per share 7.59 times c. Price-earnings ratio d. Return on average equity e. Net margin

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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