Chapter 14, Problem 14.42BP

Ratio analysis over two years (Learning Objective 4)

Comparative financial statement data of Hollingsworth, Inc., follow:

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*Selected 2015 amounts

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1. 1. Market price of Hollingsworths common stock: $50.60 at December 31, 2017, and $33.49 at December 31, 2016
2. 2. Common shares outstanding: 12,000,000 during 2017 and 12,000,000 during 2016
3. 3. All sales are credit sales

Requirements

1. 1. Compute the following ratios for 2017 and 2016:
   1. a. Current ratio
   2. b. Times-interest-earned ratio
   3. c. Inventory turnover
   4. d. Operating income percentage
   5. e. Return on common stockholders’ equity
   6. f. Earnings per share of common stock
   7. g. Price/earnings ratio
2. 2. Decide (a) whether Hollingsworth’s ability to pay debts and to sell inventory improved or deteriorated during 2017 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.