Ratio Analysis The Printing Company is listed on the New York Stock Exchange. The market value of its common stock was quoted at $10 per share at December 31, 2007 and 2006. Printing’s balance sheet at December 31, 2007 and 2006, and statement of income and retained earnings for the years then ended are as follows:
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Balance Sheet |
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December 31, |
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2007 |
2006 |
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Assets |
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Current Assets |
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Cash |
$3,500,000 |
$3,600,000 |
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Marketable securities, at market |
13,000,000 |
11,000,000 |
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Accounts receivable (net) |
105,000,000 |
95,000,000 |
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Inventories, lower of cost or market |
126,000,000 |
154,000,000 |
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Prepaid expenses |
2,500,000 |
2,400,000 |
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Total current assets |
$250,000,000 |
$266,000,000 |
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Property and plant (net) |
311,000,000 |
308,000,000 |
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Investments, at equity |
2,000,000 |
3,000,000 |
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Long term receivables |
14,000,000 |
16,000,000 |
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Goodwill and patents (net) |
6,000,000 |
6,500,000 |
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Other assets |
6,000,000 |
7,600,000 |
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Total Assets |
$589,000,000 |
$607,100,000 |
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Liabilities |
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Current Liabilities |
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Notes payable |
$5,000,000 |
$15,000,000 |
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Accounts payable |
38,000,000 |
48,000,000 |
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Accrued expenses |
24,500,000 |
27,000,000 |
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Income taxes payable |
1,000,000 |
1,000,000 |
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Current portion of long term debt |
6,500,000 |
7,000,000 |
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Total current liabilities |
75,000,000 |
98,000,000 |
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Long term debt |
169,000,000 |
180,000,000 |
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Deferred income taxes |
74,000,000 |
67,000,000 |
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Other liabilities |
9,000,000 |
8,000,000 |
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Stockholders’ Equity |
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Common stock, $1 par value |
10,000,000 |
10,000,000 |
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5% cumulative preferred stock, $100 par value; $100 liquidating value |
4,000,000 |
4,000,000 |
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Additional paid in capital |
107,000,000 |
107,000,000 |
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Retained earnings |
142,000,000 |
134,000,000 |
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Accumulated other comprehensive loss |
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Unrealized decrease in value of marketable securities |
1,000,000 |
900,000 |
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Total stockholders’ equity |
262,000,000 |
254,100,000 |
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Total Liabilities and Stockholders’ Equity |
$589,000,000 |
$607,100,000 |
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Statement of Income and Retained Earnings |
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Year Ended December 31, |
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2007 |
2006 |
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Net sales |
$600,000,000 |
$500,000,000 |
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Costs and expenses |
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Cost of goods sold |
$490,000,000 |
$400,000,000 |
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Selling and general expenses |
71,900,000 |
66,000,000 |
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Other, net |
7,000,000 |
6,000,000 |
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Total costs and expenses |
568,900,000 |
472,000,000 |
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Income before taxes |
$31,100,000 |
$28,000,000 |
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Income tax expense |
10,900,000 |
9,800,000 |
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Net income |
$20,200,000 |
$18,200,000 |
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Beginning retained earnings |
134,000,000 |
126,000,000 |
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Dividends on common stock |
12,000,000 |
10,000,000 |
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Dividends on preferred stock |
200,000 |
200,000 |
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Ending retained earnings |
$142,000,000 |
$134,000,000 |
Required
Based on the preceding information, compute (for the year 2007 only) the following:
1. Current (working capital) ratio
2. Quick (acid test) ratio
3. Number of days’ sales in average receivables, assuming a business year consists of 300 days and all sales are on account
4. Inventory turnover
5. Book value per share of common stock
6. Earnings per share on common stock
7. Price/earnings ratio on common stock
8. Dividend yield ratio on common stock