Ratios The following are a condensed income statement for 2007 and a December 31, 2007 balance sheet for the Allen Company:
|
Income Statement |
|
|
Sales (net) |
$304,400 |
|
Cost of goods sold |
183,600 |
|
Gross profit |
$120,800 |
|
Operating expenses |
82,000 |
|
Interest expense |
7,000 |
|
Income before income taxes |
$31,800 |
|
Income taxes |
10,000 |
|
Net income |
$21,800 |
|
Balance Sheet |
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|
Cash |
$8,200 |
Accounts payable |
$18,000 |
|
Receivables (net) |
14,700 |
Other current liabilities |
6,800 |
|
Inventory |
19,300 |
Bonds payable, 10% |
70,000 |
|
Property, plant, and equipment (net) |
195,800 |
Common stock, $10 par |
80,500 |
|
Premium on common stock |
24,000 |
||
|
Retained earnings |
38,700 |
||
|
Total Assets |
$238,000 |
Total Liabilities and Stockholders’ Equity |
$238,000 |
Additional information: The corporate common stock was outstanding the entire year and is selling for $16 per share at yearend. On January 1, 2007, the inventory was $21,500, the total assets were $224,000, the accounts payable were $18,800, and the total stockholders’ equity was $130,800. The company operates on a 300 day business year.
Required
For the Allen Company, compute the following ratios:
1. Price/earnings
2. Profit margin
3. Return on total assets
4. Return on stockholders’ equity
5. Current
6. Inventory turnover (in days)
7. Payables turnover (in days)
8. Debt
Is the company favorably “trading on its equity”? Explain.