problem 5 kersenbrock corporation case solution 500852

Condensed balance sheet and income statement data for Kersenbrock Corporation appears below: Kersenbrock CORPORATION Balance Sheet December 31 2011 2010 2009 Cash $25,000.00 $20,000.00 $18,000.00 Receivables (net) 50,000 45,000 48,000 Other current assets 90,000 95,000 64,000 Investments 75,000 70,000 45,000 Plant and equipment (net) 400,000 370,000 358,000 $640,000 $600,000 $533,000 Current liabilities $75,000 $80,000 $70,000 Long-term debt 80,000 85,000 50,000 Common stock, $10 par 340,000 310,000 300,000 Retained Earnings 145,000 125,000 113,000 $640,000 $600,000 $533,000 Kersenbrock CORPORATION Income Statement For the Year Ended December 31 2011 2010 Sales $740,000 $700,000 Less: Sales returns and allowances 40,000 50,000 Net sales 700,000 650,000 Cost of goods sold 420,000 400,000 Gross profit 280,000 250,000 Operating expenses (including income taxes) 232,000 218,000 Net income $48,000 $32,000 Additional information: 1. The market price of Legal’s common stock was: $4.00 for 2009 $5.00 for 2010 $8.00 for 2011 2. All dividends were paid in cash. Instructions: (a)(1) Compute the profit margin for 2010 and 2011. “2010 Profit margin” Title = Amount = Formula Title Amount “2011 Profit margin” Title = Amount = Formula Title Amount (a)(2) Compute the asset turnover for 2010 and 2011. “2010 Asset turnover” Title = Amount = Formula time Title Amount “2011 Asset turnover” Title = Amount = Formula time Title Amount (a)(3) Compute the earnings per share for 2010 and 2011. (Weighted average common shares in 2011 were 32,000 and in 2010 were 31,000 “2010 Earnings per share” Title = Amount = Formula per share Title Amount “2011 Earnings per share” Title = Amount = Formula per share Title Amount (a)(4) Compute the price-earnings ratio for 2010 and 2011. “2010 Price-earnings ratio” Title = Amount = Formula times Title Amount “2011 Price-earnings ratio” Title = Amount = Formula times Title Amount (a)(5) Compute the payout ratio for 2010 and 2011. “2010 Payout ratio” Title = Amount = Formula Title Amount “2011 Payout ratio” Title = Amount = Formula Title Amount (a)(6) Compute the debt to total assets for 2010 and 2011. “2010 Debt to total assets” Title Amount = Formula Title Amount “2011 Debt to total assets” Title Amount = Formula Title Amount (b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2010 to 2011 of Kersenbrock Corporation.