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Refer to the financial statements of Mixon Company in Exercises 1–3 and 1–5. The following additional information about the company is known: Please see attached images Commonstockmarketprice,December31,2006 ...... $15.00 Common stock market price, December 31, 2005 . . . . . . 14.00 Annualcashdividendspersharein2006 ............ 0.60 Annualcashdividendspersharein2005 ............ 0.30 To help evaluate the profitability of the company, compute the following for 2006 and 2005: (a) return on common stockholders’ equity, (b) price-earnings ratio on December 31, and (c) divi- dend yield.

Refer to the financial statements of Mixon Company in Exercises 1–3 and 1–5. The following additional information about the company is known: Please see attached images Commonstockmarketprice,December31,2006 ...... $15.00 Common stock market price, December 31, 2005 . . . . . . 14.00 Annualcashdividendspersharein2006 ............ 0.60 Annualcashdividendspersharein2005 ............ 0.30 To help evaluate the profitability of the company, compute the following for 2006 and 2005: (a) return on common stockholders’ equity, (b) price-earnings ratio on December 31, and (c) divi- dend yield.

FINANCIAL ACCOUNTING
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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Refer to the financial statements of Mixon Company in Exercises 1–3 and 1–5. The following additional information about the company is known: Please see attached images

Commonstockmarketprice,December31,2006 ...... $15.00

Common stock market price, December 31, 2005 . . . . . . 14.00

Annualcashdividendspersharein2006 ............ 0.60

Annualcashdividendspersharein2005 ............ 0.30

To help evaluate the profitability of the company, compute the following for 2006 and 2005: (a) return on common stockholders’ equity, (b) price-earnings ratio on December 31, and (c) divi- dend yield.

Mixon Company's year-end balance sheets show the following: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Accounts payable .. Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity 2006 $ 30,800 88,500 111,500 9,700 277,500 $518,000 $128,900 97,500 162,500 129,100 $518,000 2005 2004 $ 35,625 $36,800 62,500 49,200 82,500 53,000 9,375 4,000 255,000 229,500 $445,000 $372,500 $ 75,250 $ 49,250 102,500 82,500 162,500 162,500 104,750 78,250 $445,000 $372,500 Required: Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the: (a) current ratio and (b) acid-test ratio. Comment on the ratio results. EXERCISE 1-3 Evaluating Short-Term Liquidity
Transcribed Image Text:Mixon Company's year-end balance sheets show the following: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Accounts payable .. Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity 2006 $ 30,800 88,500 111,500 9,700 277,500 $518,000 $128,900 97,500 162,500 129,100 $518,000 2005 2004 $ 35,625 $36,800 62,500 49,200 82,500 53,000 9,375 4,000 255,000 229,500 $445,000 $372,500 $ 75,250 $ 49,250 102,500 82,500 162,500 162,500 104,750 78,250 $445,000 $372,500 Required: Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the: (a) current ratio and (b) acid-test ratio. Comment on the ratio results. EXERCISE 1-3 Evaluating Short-Term Liquidity
EXERCISE 1-5 Evaluating Short-Term Liquidity Refer to the information in Exercise 1-3 about Mixon Company. The company's income state- ments for the years ended December 31, 2006 and 2005 show the following: 2006 Sales Cost of goods sold Other operating expenses Interest expense Income taxes Total costs and expenses Net income Earnings per share $410,225 208,550 11,100 8,525 $672,500 (638,400) $ 34,100 $ 2.10 $344,500 133,980 12,300 7,845 2005 $530,000 (498,625) $ 31,375 $ 1.93 Required: For the years ended December 31, 2006 and 2005, assume all sales are on credit and then compute the following: (a) collection period, (b) accounts receivable turnover, (c) inventory turnover, and (d) days' sales in inventory. Comment on the changes in the ratios from 2005 to 2006.
Transcribed Image Text:EXERCISE 1-5 Evaluating Short-Term Liquidity Refer to the information in Exercise 1-3 about Mixon Company. The company's income state- ments for the years ended December 31, 2006 and 2005 show the following: 2006 Sales Cost of goods sold Other operating expenses Interest expense Income taxes Total costs and expenses Net income Earnings per share $410,225 208,550 11,100 8,525 $672,500 (638,400) $ 34,100 $ 2.10 $344,500 133,980 12,300 7,845 2005 $530,000 (498,625) $ 31,375 $ 1.93 Required: For the years ended December 31, 2006 and 2005, assume all sales are on credit and then compute the following: (a) collection period, (b) accounts receivable turnover, (c) inventory turnover, and (d) days' sales in inventory. Comment on the changes in the ratios from 2005 to 2006.
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