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Selected data from the 2016 statements follows: Accounts receivable (net) Inventory Long-term debt Other data: $20,000 92,000 60,000 $ 40,000 48,000 70,000 Share price at end of 2017 $4 18 $4 15 Income tax rate 30% 30% Dividends declared and paid in 2017 Number of common shares during 2017 $36,000 15,000 $150,000 50,000 The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years, and each has had steady growth. The management of each has a different viewpoint in many respects. Blair Company is more conservative, and as its president said, "We avoid what we consider to be undue risk." Neither company is publicly held. Armstrong Company has an annual audit by an independent auditor, but Blair Company does not. Required: 1. Complete a schedule that reflects a ratio analysis of each company. Use ending balances if average balances are not available. (Round intermediate calculations and final answers to 2 decimal places.) Ratio Armstrong Company Blair Company Tests of profitability: Return on equity 30.00 % 45.00 % Return on assets 11.25 % 11.25 % Financial leverage percentage % Earnings per share %24 3.00 per share 24 1.80 per share Profit margin 10.00 % 11.11 % Fixed asset turnover 2.00 times 1.14 times Tests of liquidity: Cash ratio Current ratio 1.75 1.84 Quick ratio

Selected data from the 2016 statements follows: Accounts receivable (net) Inventory Long-term debt Other data: $20,000 92,000 60,000 $ 40,000 48,000 70,000 Share price at end of 2017 $4 18 $4 15 Income tax rate 30% 30% Dividends declared and paid in 2017 Number of common shares during 2017 $36,000 15,000 $150,000 50,000 The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years, and each has had steady growth. The management of each has a different viewpoint in many respects. Blair Company is more conservative, and as its president said, "We avoid what we consider to be undue risk." Neither company is publicly held. Armstrong Company has an annual audit by an independent auditor, but Blair Company does not. Required: 1. Complete a schedule that reflects a ratio analysis of each company. Use ending balances if average balances are not available. (Round intermediate calculations and final answers to 2 decimal places.) Ratio Armstrong Company Blair Company Tests of profitability: Return on equity 30.00 % 45.00 % Return on assets 11.25 % 11.25 % Financial leverage percentage % Earnings per share %24 3.00 per share 24 1.80 per share Profit margin 10.00 % 11.11 % Fixed asset turnover 2.00 times 1.14 times Tests of liquidity: Cash ratio Current ratio 1.75 1.84 Quick ratio

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The 2017 financial statements for Armstrong and Blair companies are summarized below: Blair Armstrong Company Company Statement of Financial Position $35,000 40,000 100,000 140,000 85,000 $ 22,000 30,000 40,000 400,000 308,000 Cash Accounts receivable (net) Inventory Property, plant, and equipment (net) Other non-current assets Total assets $ 400,000 $ 800,000 $ 100,000 60,000 150,000 30,000 60,000 $ 50,000 70,000 500,000 110,000 70,000 Current liabilities Long-term debt (10%) Share capital Contributed surplus Retained earnings Total liabilities and shareholders' equity $ 400,000 $ 800,000 Statement of Earnings Sales revenue (1/3 on credit) Cost of sales $ 450,000 (245,000) (160,000) $ 810,000 (405,000) (315,000) Expenses (including interest and income tax) Net earnings $ 45,000 $ 90,000 Selected data from the 2016 statements follows: Prev 1 of 2
Transcribed Image Text:The 2017 financial statements for Armstrong and Blair companies are summarized below: Blair Armstrong Company Company Statement of Financial Position $35,000 40,000 100,000 140,000 85,000 $ 22,000 30,000 40,000 400,000 308,000 Cash Accounts receivable (net) Inventory Property, plant, and equipment (net) Other non-current assets Total assets $ 400,000 $ 800,000 $ 100,000 60,000 150,000 30,000 60,000 $ 50,000 70,000 500,000 110,000 70,000 Current liabilities Long-term debt (10%) Share capital Contributed surplus Retained earnings Total liabilities and shareholders' equity $ 400,000 $ 800,000 Statement of Earnings Sales revenue (1/3 on credit) Cost of sales $ 450,000 (245,000) (160,000) $ 810,000 (405,000) (315,000) Expenses (including interest and income tax) Net earnings $ 45,000 $ 90,000 Selected data from the 2016 statements follows: Prev 1 of 2
Saved nework Assignment i Selected data from the 2016 statements follows: Accounts receivable (net) Inventory Long-term debt Other data: $20,000 92,000 60,000 $ 40,000 48,000 70,000 Share price at end of 2017 $ 18 $ 15 Income tax rate 30% 30% Dividends declared and paid in 2017 Number of common shares during 2017 $36,000 15,000 $150,000 50,000 The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years, and each has had steady growth. The management of each has a different viewpoint in many respects. Blair Company is more conservative, and as its president said, "We avoid what we consider to be undue risk." Neither company is publicly held. Armstrong Company has an annual audit by an independent auditor, but Blair Company does not. Required: 1. Complete a schedule that reflects a ratio analysis of each company. Use ending balances if average balances are not available. (Round intermediate calculations and final answers to 2 decimal places.) Ratio Armstrong Company Blair Company Tests of profitability: Return on equity 30.00 % 45.00 % Return on assets 11.25 % 11.25 % Financial leverage percentage Earnings per share 24 3.00 per share $ 1.80 per share Profit margin 10.00 % 11.11 % - Fixed asset turnover 2.00 times 1.14 times Tests of liquidity: Cash ratio Current ratio 1.75 1.84 Quick ratio Prev 1 of 2
Transcribed Image Text:Saved nework Assignment i Selected data from the 2016 statements follows: Accounts receivable (net) Inventory Long-term debt Other data: $20,000 92,000 60,000 $ 40,000 48,000 70,000 Share price at end of 2017 $ 18 $ 15 Income tax rate 30% 30% Dividends declared and paid in 2017 Number of common shares during 2017 $36,000 15,000 $150,000 50,000 The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years, and each has had steady growth. The management of each has a different viewpoint in many respects. Blair Company is more conservative, and as its president said, "We avoid what we consider to be undue risk." Neither company is publicly held. Armstrong Company has an annual audit by an independent auditor, but Blair Company does not. Required: 1. Complete a schedule that reflects a ratio analysis of each company. Use ending balances if average balances are not available. (Round intermediate calculations and final answers to 2 decimal places.) Ratio Armstrong Company Blair Company Tests of profitability: Return on equity 30.00 % 45.00 % Return on assets 11.25 % 11.25 % Financial leverage percentage Earnings per share 24 3.00 per share $ 1.80 per share Profit margin 10.00 % 11.11 % - Fixed asset turnover 2.00 times 1.14 times Tests of liquidity: Cash ratio Current ratio 1.75 1.84 Quick ratio Prev 1 of 2
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