RATIO ANALY SIS OF COMPARATI VE FIN ANCIAL STATE MENT S Refer to the financial statements in Problem 24-8B.
REQUIRED
Calculate the following ratios and amounts for 20-1 and 20-2 (round all calculations to two decimal places).
(a) Return on assets (Total assets on January 1, 20-1, were $111,325.)
(b) Return on common stockholders’ equity (Total common stockholders’ equity on January 1, 20-1, was $82,008.)
(c) Earnings per share of common stock (The average numbers of shares outstanding were 6,300 shares in 20-1 and 6,900 in 20-2.)
(d) Book value per share of common stock
(e) Quick ratio
(f)
(g)
(h) Receivables turnover and average collection period (Net receivables on January 1, 20-1, were $28,995.)
(i) Merchandise inventory turnover and average number of days to sell inventory (Merchandise inventory on January 1, 20-1, was $32,425.)
(j) Debt-to-equity ratio
(k) Asset turnover (Assets on January 1, 20-1, were $111,325.)
(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 $120.00 and $110.00 on December 31, 20-2 and 20-1, respectively.)
Calculate the following ratios and amounts for 20-1 and 20-2.
- (a) Return on assets
- (b) Return on common stockholders’ equity
- (c) Earnings per share
- (d) Book value per share
- (e) Quick ratio
- (f) Current ratio
- (g) Working capital
- (h) Receivables turnover and average collection period
- (i) Merchandise inventory and average number of days to sell inventory
- (j) Debt-equity ratio
- (k) Assets turnover
- (l) Times interest earned ratio
- (m) Profit margin ratio
- (n) Assets to equity ratio
- (o) Price-earnings ratio
Explanation of Solution
Financial statement analysis:
Financial statement analysis is a valuable measure for evaluating management performance.
The methods of analysis must be used carefully with in their limitations.
(a)
Calculate return on assets during the period of 20-2.
Calculate return on assets during the period of 20-1.
(b)
Calculate return on common stockholders’ equity during the period of 20-2.
Calculate return on common stockholders’ equity during the period of 20-1.
(c)
Calculate earnings per share of common stock during the period of 20-2.
Calculate earnings per share of common stock during the period of 20-1.
(d)
Calculate book value per share of common stock during the period of 20-2.
Calculate book value per share of common stock during the period of 20-1.
(e)
Calculate quick ratio during the period of 20-2.
Calculate quick ratio during the period of 20-1.
(f)
Calculate current ratio during the period of 20-2.
Calculate current ratio during the period of 20-1.
(g)
Calculate working capital during the period of 20-2.
Calculate working capital during the period of 20-1.
(h)
Calculate receivables turnover during the period of 20-2.
Calculate receivables turnover during the period of 20-1.
Calculate average collection period during the period 20-2.
Calculate average collection period during the period 20-1.
(i)
Calculate merchandise inventory turnover during the period 20-2.
Calculate merchandise inventory turnover during the period 20-1.
Calculate average number of days to sell inventory during the period of 20-2.
Calculate average number of days to sell inventory during the period of 20-1.
(j)
Calculate debt-equity ratio during the period of 20-2.
Calculate debt-equity ratio during the period of 20-1.
Calculate asset turnover ratio during the period of 20-2.
Calculate asset turnover ratio during the period of 20-1.
(l)
Calculate time interest earned ratio during the period of 20-2.
Calculate time interest earned ratio during the period of 20-1.
(m)
Calculate profit margin ratio during the period of 20-2.
Calculate profit margin ratio during the period of 20-1.
(n)
Calculate assets to equity ratio during the period of 20-2.
Calculate assets to equity ratio during the period of 20-1.
(o)
Calculate price earnings ratio during the period of 20-2.
Calculate price earnings ratio during the period of 20-2.
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