Financial information for Messersmith Company is presented below MESSERSMITH COM

Question

Financial information for Messersmith Company is presented below MESSERSMITH COMPANY Balance Sheets 31 2017 2016 Assets Cash Short-term investments Accounts receivable (net) Inventory Prepaid expenses Land Building and equipment (net) $ 77,000 $ 71,500 57,200 44,000 107,800 88,000 137,500 148,500 31,900 25,300 143,000 143,000 198,000 192,500 $752,400 $712,800 Liabilities and Stockholders Equi Notes payable $110,000 $110,000 Accounts payable Accrued liabilities 52,800 46,200 55,000 44,000 Bonds payable, 165,000 165,000 due 2020 Common stock, $10 par Retained earnings 220,000 220,000 149,600 127,600 $752,400 $712,800 MESSERSMITH COMPANY Income Statement For the Years Ended December 31 2017 2016 Net sales $935,000 $869,000 Cost of goods sold Gross profit 682,000 632,500 253,000 236,500 Pera205,700 190,300 expenses Net income $47,300 $46,200 Additional information: 1. Inventory at the beginning of 2016 was $129,800 2. Total assets at the beginning of 2016 were $693,000 3. No common stock transactions occurred during 2016 or 2017. 4. All sales were on account. Accounts receivable, net at the beginning of 2016 were $96,800 5. Notes payable are classified as current liabilities

Explanation / Answer

Debt to Assets = Total Debt / Total Assets
2017 = (110000 + 52800 + 55000 + 165000) / 752400 = 382800 / 752400 = 0.5087 or 50.87%
2018 = (52800 + 55000 + 165000) / 642400 = 272800 / 770000 = 0.3542 or 35.42%
Ratio decreased from last year

Price to Earning Ratio = Market Value per share / Earning per share
2017 = $10 / $2.15 = 4.65 times or 4.7 times rounded off
2018 = $14.08 / $2.5 = 5.6 times rounded off

EPS = Net Income / Outstanding common shares
2017 = $47300 / 22000 = $2.15
2018 = $55000 / 22000 = $2.5

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