Ratio Analysis of Comparative Financial Statements Amounts from the comparative income statement and balance sheet of Miller Electronics Corporation for the last two years are as follows: Miller Electronics Corporation Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 20-2 20-1 Net Sales (all on account) $643,800 $415,800 Cost of goods sold 387,260 254,650 Gross profit $256,540 $161,150 Administrative expenses $63,715 $41,626 Selling expenses 66,780 44,317 Total operating expenses $130,495 $85,943 Operating income $126,045 $75,207 Interest expense 1,316 1,241 Income before income taxes $124,729 $73,966 Income tax expense 30,895 13,143 Net income $93,834 $60,823 Miller Electronics Corporation Comparative Balance Sheet December 31, 20-2 and 20-1 20-2 20-1 Assets Current assets: Cash $42,848 $21,768 Receivables (net) 72,530 46,550 Merchandise inventory 92,271 50,540 Supplies and prepayments 3,892 1,188 Total current assets $211,541 $120,046 Property, plant, and equipment: Office equipment (net) $11,737 $8,100 Factory equipment (net) 106,005 71,940 Total property, plant, and equipment 117,742 $80,040 Total assets $329,283 $200,086 Liabilities Current liabilities Notes payable $9,920 $5,920 Accounts payable 43,608 30,263 Accrued and withheld payroll taxes 6,377 5,547 Total current liabilities $59,905 $41,730 Stockholders' Equity Common stock ($10 par) $100,000 $84,000 Retained earnings 169,378 74,356 Total stockholders' equity $269,378 $158,356 Total liabilities and stockholders' equity $329,283 $200,086 Required: Calculate the following ratios and amounts for 20-1 and 20-2. Round all calculations to two decimal places. Use 365 days when computing the accounts receivable and merchandise inventory turnover. (a) Return on assets (Total assets on January 1, 20-1, were $170,406.) (b) Return on common stockholders' equity (Total common stockholders' equity on January 1, 20-1, was $107,766.) (c) Earnings per share of common stock (The average numbers of shares outstanding were 8,400 shares in 20-1 and 9,200 in 20-2.) (d) Book value per share of common stock (e) Quick ratio (f) Current ratio (g) Working capital (h) Receivables turnover (Net receivables on January 1, 20-1, were $37,600.) (i) Merchandise inventory turnover (Merchandise inventory on January 1, 20-1, was $49,020.) (j) Debt-to-equity ratio (k) Asset turnover (Assets on January 1, 20-1, were $170,406.) (l) Times interest earned ratio (m) Profit margin ratio (n) Assets-to-equity ratio (o) Price-earnings ratio (The market price of the common stock was $100.00 and $85.00 on December 31, 20-2 and 20-1, respectively.) a. Return on assets: 20-2 % 20-1 % b. Return on common stockholders' equity: 20-2 % 20-1 % c. Earnings per share of common stock: 20-2 $ 20-1 $ d. Book value per share of common stock: 20-2 $ 20-1 $ e. Quick ratio: 20-2 to 1 20-1 to 1 f. Current ratio: 20-2 to 1 20-1 to 1 g. Working capital: 20-2 $ 20-1 $ h. Receivables turnover: 20-2 days 20-1 days i. Merchandise inventory turnover: 20-2 days 20-1 days j. Debt-to-equity ratio: 20-2 to 1 20-1 to 1 k. Asset turnover: 20-2 to 1 20-1 to 1 l. Times interest earned ratio: 20-2 times 20-1 times m. Profit margin ratio: 20-2 % 20-1 % n. Assets-to-equity ratio: 20-2 to 1 20-1 to 1 o. Price-earnings ratio: 20-2 20-1

Ratio Analysis of Comparative Financial Statements Amounts from the comparative income statement and balance sheet of Miller Electronics Corporation for the last two years are as follows: Miller Electronics Corporation Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 20-2 20-1 Net Sales (all on account) $643,800 $415,800 Cost of goods sold 387,260 254,650 Gross profit $256,540 $161,150 Administrative expenses $63,715 $41,626 Selling expenses 66,780 44,317 Total operating expenses $130,495 $85,943 Operating income $126,045 $75,207 Interest expense 1,316 1,241 Income before income taxes $124,729 $73,966 Income tax expense 30,895 13,143 Net income $93,834 $60,823 Miller Electronics Corporation Comparative Balance Sheet December 31, 20-2 and 20-1 20-2 20-1 Assets Current assets: Cash $42,848 $21,768 Receivables (net) 72,530 46,550 Merchandise inventory 92,271 50,540 Supplies and prepayments 3,892 1,188 Total current assets $211,541 $120,046 Property, plant, and equipment: Office equipment (net) $11,737 $8,100 Factory equipment (net) 106,005 71,940 Total property, plant, and equipment 117,742 $80,040 Total assets $329,283 $200,086 Liabilities Current liabilities Notes payable $9,920 $5,920 Accounts payable 43,608 30,263 Accrued and withheld payroll taxes 6,377 5,547 Total current liabilities $59,905 $41,730 Stockholders' Equity Common stock ($10 par) $100,000 $84,000 Retained earnings 169,378 74,356 Total stockholders' equity $269,378 $158,356 Total liabilities and stockholders' equity $329,283 $200,086 Required: Calculate the following ratios and amounts for 20-1 and 20-2. Round all calculations to two decimal places. Use 365 days when computing the accounts receivable and merchandise inventory turnover. (a) Return on assets (Total assets on January 1, 20-1, were $170,406.) (b) Return on common stockholders' equity (Total common stockholders' equity on January 1, 20-1, was $107,766.) (c) Earnings per share of common stock (The average numbers of shares outstanding were 8,400 shares in 20-1 and 9,200 in 20-2.) (d) Book value per share of common stock (e) Quick ratio (f) Current ratio (g) Working capital (h) Receivables turnover (Net receivables on January 1, 20-1, were $37,600.) (i) Merchandise inventory turnover (Merchandise inventory on January 1, 20-1, was $49,020.) (j) Debt-to-equity ratio (k) Asset turnover (Assets on January 1, 20-1, were $170,406.) (l) Times interest earned ratio (m) Profit margin ratio (n) Assets-to-equity ratio (o) Price-earnings ratio (The market price of the common stock was $100.00 and $85.00 on December 31, 20-2 and 20-1, respectively.) a. Return on assets: 20-2 % 20-1 % b. Return on common stockholders' equity: 20-2 % 20-1 % c. Earnings per share of common stock: 20-2 $ 20-1 $ d. Book value per share of common stock: 20-2 $ 20-1 $ e. Quick ratio: 20-2 to 1 20-1 to 1 f. Current ratio: 20-2 to 1 20-1 to 1 g. Working capital: 20-2 $ 20-1 $ h. Receivables turnover: 20-2 days 20-1 days i. Merchandise inventory turnover: 20-2 days 20-1 days j. Debt-to-equity ratio: 20-2 to 1 20-1 to 1 k. Asset turnover: 20-2 to 1 20-1 to 1 l. Times interest earned ratio: 20-2 times 20-1 times m. Profit margin ratio: 20-2 % 20-1 % n. Assets-to-equity ratio: 20-2 to 1 20-1 to 1 o. Price-earnings ratio: 20-2 20-1

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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Ratio Analysis of Comparative Financial Statements

Amounts from the comparative income statement and balance sheet of Miller Electronics Corporation for the last two years are as follows:

Miller Electronics Corporation Comparative Income Statement For Years Ended December 31, 20-2 and 20-1
	20-2	20-1
Net Sales (all on account)		$643,800	$415,800
Cost of goods sold		387,260	254,650
Gross profit		$256,540	$161,150
Administrative expenses		$63,715	$41,626
Selling expenses		66,780	44,317
Total operating expenses		$130,495	$85,943
Operating income		$126,045	$75,207
Interest expense		1,316	1,241
Income before income taxes		$124,729	$73,966
Income tax expense		30,895	13,143
Net income		$93,834	$60,823

Miller Electronics Corporation Comparative Balance Sheet December 31, 20-2 and 20-1
	20-2	20-1
Assets
Current assets:
Cash		$42,848	$21,768
Receivables (net)		72,530	46,550
Merchandise inventory		92,271	50,540
Supplies and prepayments		3,892	1,188
Total current assets		$211,541	$120,046
Property, plant, and equipment:
Office equipment (net)		$11,737	$8,100
Factory equipment (net)		106,005	71,940
Total property, plant, and equipment		117,742	$80,040
Total assets		$329,283	$200,086
Liabilities
Current liabilities
Notes payable		$9,920	$5,920
Accounts payable		43,608	30,263
Accrued and withheld payroll taxes		6,377	5,547
Total current liabilities		$59,905	$41,730
Stockholders' Equity
Common stock ($10 par)		$100,000	$84,000
Retained earnings		169,378	74,356
Total stockholders' equity		$269,378	$158,356
Total liabilities and stockholders' equity		$329,283	$200,086

Required:

Calculate the following ratios and amounts for 20-1 and 20-2. Round all calculations to two decimal places. Use 365 days when computing the accounts receivable and merchandise inventory turnover.

(a)	Return on assets (Total assets on January 1, 20-1, were $170,406.)
(b)	Return on common stockholders' equity (Total common stockholders' equity on January 1, 20-1, was $107,766.)
(c)	Earnings per share of common stock (The average numbers of shares outstanding were 8,400 shares in 20-1 and 9,200 in 20-2.)
(d)	Book value per share of common stock
(e)	Quick ratio
(f)	Current ratio
(g)	Working capital
(h)	Receivables turnover (Net receivables on January 1, 20-1, were $37,600.)
(i)	Merchandise inventory turnover (Merchandise inventory on January 1, 20-1, was $49,020.)
(j)	Debt-to-equity ratio
(k)	Asset turnover (Assets on January 1, 20-1, were $170,406.)
(l)	Times interest earned ratio
(m)	Profit margin ratio
(n)	Assets-to-equity ratio
(o)	Price-earnings ratio (The market price of the common stock was $100.00 and $85.00 on December 31, 20-2 and 20-1, respectively.)

a. Return on assets:
20-2	%
20-1	%
b. Return on common stockholders' equity:
20-2	%
20-1	%
c. Earnings per share of common stock:
20-2	$
20-1	$
d. Book value per share of common stock:
20-2	$
20-1	$
e. Quick ratio:
20-2	to 1
20-1	to 1
f. Current ratio:
20-2	to 1
20-1	to 1
g. Working capital:
20-2	$
20-1	$
h. Receivables turnover:
20-2	days
20-1	days
i. Merchandise inventory turnover:
20-2	days
20-1	days
j. Debt-to-equity ratio:
20-2	to 1
20-1	to 1
k. Asset turnover:
20-2	to 1
20-1	to 1
l. Times interest earned ratio:
20-2	times
20-1	times
m. Profit margin ratio:
20-2	%
20-1	%
n. Assets-to-equity ratio:
20-2	to 1
20-1	to 1
o. Price-earnings ratio:
20-2
20-1

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