Pearson eText for Financial Accounting -- Instant Access (Pearson+)
5th Edition
ISBN: 9780137525423
Author: Robert Kemp, Jeffrey Waybright
Publisher: PEARSON+
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Chapter 12, Problem 34AP
Calculating various ratios for analysis (Learning Objectives 2 & 3) 20-25 min.
Comparative financial statement data of Lodgepole Furniture Company follow:
| Lodgepole Furniture Company Income Statement Years Ended December 31, 2018 and 2017 |
||||
| 2018 | 2017 | |||
| Net Sales | $494,000 | $464,000 | ||
| Cost of Goods Sold | 242,000 | 233,000 | ||
| Grass Profit | 252,000 | 231,000 | ||
| Operating Expenses | 135,000 | 140,000 | ||
| Income from Operations | 117,000 | 91,000 | ||
| Interest Expense | 8,000 | 18,000 | ||
| Income Before Income Tax | 109,000 | 73,000 | ||
| Income Tax Expense | 28,000 | 24,000 | ||
| Net Income | $81,000 | $49,000 | ||
| Lodgepole Furniture Company Balance Sheet December 31, 2018 and 2017 (Selected 2016 amounts given for computation of ratios) |
|||||
| 2018 | 2017 | 2016 | |||
| Current Assets: | |||||
| Cash | $98,000 | $102,000 | |||
| 103,000 | 95,000 | $106,000 | |||
| Inventory | 167,000 | 158,000 | 189,000 | ||
| Prepaid Expenses | 32,000 | 18,000 | |||
| Total Current Assets | 400,000 | 373,000 | |||
| Property, Plant, and Equipment, Net | 197,000 | 178,000 | |||
| Total Assets | $597,000 | $551,000 | |||
| Total Current Liabilities | $212,000 | $232,000 | |||
| Long-Term Liabilities | 124,000 | 114,000 | |||
| Total Liabilities | 336,000 | 346,000 | |||
| Common Stockholders’ Equity, No Par | 261,000 | 205,000 | 197,000 | ||
| Total Liabilities and Stockholders’ Equity | $597,000 | $551,000 | |||
Other information follows:
a. Market price of a share of common stock was $50.00 at December 31, 2018. and $33.00 at December 31, 2017.
b. An average of 11,000 common shares were outstanding during 2018 and 8,000 during 2017.
Requirements
1. Compute the following ratios for 2018 and 2017. Round to two decimal places. Assume all sales are on credit.
- a.
Current ratio - b. Inventory turnover
- c. Accounts receivable turnover
- d. Interest coverage ratio
- e. Return on equity
- f. Earnings per share of common stock
- g. Price-earnings ratio
2. Decide (a) whether Lodgepole Furniture Company’s performance improved or deteriorated during 2018 and (b) whether the attractiveness of its common stock as an investment seems to have increased or decreased.
How will what you learned in this problem help you evaluate an investment?
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Chapter 12 Solutions
Pearson eText for Financial Accounting -- Instant Access (Pearson+)
Ch. 12 - Prob. 1DQCh. 12 - Which amount is the base amount for vertical...Ch. 12 - Prob. 3DQCh. 12 - Prob. 4DQCh. 12 - Prob. 5DQCh. 12 - Prob. 6DQCh. 12 - Prob. 7DQCh. 12 - How would you expect a recession to affect asset...Ch. 12 - Prob. 9DQCh. 12 - Prob. 10DQ
Ch. 12 - Prob. 1SCCh. 12 - Prob. 2SCCh. 12 - Prob. 3SCCh. 12 - Prob. 4SCCh. 12 - Prob. 5SCCh. 12 - Prob. 6SCCh. 12 - Prob. 7SCCh. 12 - Prob. 8SCCh. 12 - Prob. 9SCCh. 12 - Prob. 10SCCh. 12 - Prob. 11SCCh. 12 - Prob. 12SCCh. 12 - Prob. 1SECh. 12 - Prob. 2SECh. 12 - Prob. 3SECh. 12 - Prob. 4SECh. 12 - Prob. 5SECh. 12 - Prob. 6SECh. 12 - Prob. 7SECh. 12 - Prob. 8SECh. 12 - Prob. 9SECh. 12 - Prob. 10SECh. 12 - Horizontal analysis(Learning Objective 2)15-20 min...Ch. 12 - Prob. 12AECh. 12 - Horizontal analysis(Learning Objective 2)15-20...Ch. 12 - Prob. 14AECh. 12 - Prob. 15AECh. 12 - Prob. 16AECh. 12 - Prob. 17AECh. 12 - Horizontal analysis(Learning Objective 2)15-20...Ch. 12 - Prob. 26BECh. 12 - Prob. 27BECh. 12 - Prob. 28BECh. 12 - Prob. 29BECh. 12 - Prob. 30BECh. 12 - Trend percentages and return on assets (Learning...Ch. 12 - Common-size financial statements and profitability...Ch. 12 - Current ratio, debt ratio, EPS (Learning Objective...Ch. 12 - Calculating various ratios for analysis (Learning...Ch. 12 - Prob. 35APCh. 12 - Prob. 36APCh. 12 - Trend percentages and return on assets (Learning...Ch. 12 - Common-size financial statements and profitability...Ch. 12 - Prob. 39BPCh. 12 - Calculating various ratios for analysis(Learning...Ch. 12 - Calculating various ratios for analysis (Learning...Ch. 12 - Prob. 42BPCh. 12 - Prob. 1CECh. 12 - Prob. 1CPCh. 12 - Prob. 1EIACh. 12 - Prob. 2EIACh. 12 - Prob. 1FACh. 12 - Industry Analysis Purpose: To help you understand...Ch. 12 - Prob. 1SBACh. 12 - Prob. 1WC
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