P10-6A. Calculate and analyze financial ratios. (LO 3)
The following information was taken from the 2008 annual report of Presentations
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At December 31, (in thousands) |
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|
2008 |
2007 |
|
|
ASSETS |
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|
Current assets |
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Cash |
$1,617 |
$1,220 |
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Accounts receivable |
1,925 |
3,112 |
|
Merchandise inventory |
2,070 |
966 |
|
Prepaid expenses |
188 |
149 |
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Total current assets |
5,800 |
5,447 |
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Plant and equipment: |
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Buildings net |
$4457 |
$2,992 |
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Equipment net |
1,293 |
1,045 |
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Total plant and equipment |
$5,750 |
$4,037 |
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Total assets |
$11,550 |
$9,484 |
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LIABILITIES |
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Current liabilities |
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Accounts payable |
$ 1817 |
$ 1,685 |
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Notes payable |
900 |
1,100 |
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Total current liabilities |
2,717 |
2,785 |
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Long- term liabilities |
3,500 |
2,000 |
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Total liabilities |
6,217 |
4,795 |
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STOCKHOLDERESQ’ UITY |
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|
Common stock, no par value |
3,390 |
3,042 |
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Retained earnings |
1,943 |
1,657 |
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Total stockholder’s equity |
5,333 |
4,699 |
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Total liabilities and stockholder’s equity |
$11,550 |
59,484 |
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Sales revenue |
$12,228 |
|
|
Cost of goods sold |
8,751 |
|
|
Gross profit on sales |
3,477 |
|
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Operating expenses: |
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Depreciation-buildings and equipment |
102 |
|
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Other selling and administrative |
2,667 |
|
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Total expenses |
2,769 |
|
|
Income before interest and taxes |
708 |
|
|
Interest expense |
168 |
|
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Income before taxes |
540 |
|
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Income taxes |
114 |
|
|
Net income |
$426 |
Required
a. Calculate the following ratios for 2008 and 2007 whenever possible.
1. Debt-to-equity ratio
2. Gross margin percentage
3. Current ratio
4. Acid-test ratio
5. Times-interest-earned ratio
b. What do the ratios indicate about the success of Presentations? What additional information would help you analyze the overall performance of this company?