( Debt to assets ratio) Condensed balance sheet and income statement data for La
ID: 2476799 • Letter: #
Question
( Debt to assets ratio)
Condensed balance sheet and income statement data for Landwehr Corporation appear below.
LANDWEHR CORPORATION
Balance Sheets
December 31
2018
2017
2016
LANDWEHR CORPORATION
Income Statement
For the Years Ended December 31
2018
2017
Additional information:
(a)
Compute the following ratios for 2017 and 2018. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.)
2017
2018
LANDWEHR CORPORATION
Balance Sheets
December 31
2018
2017
2016
Cash $ 25,000 $ 20,000 $ 18,000 Accounts receivable (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 $533,000Explanation / Answer
Answer: (1) Profit margin=(Net income/Net sales )*100
2017=(30000/650000)*100=4.62%
2018=(45000/700000)*100=6.43%
(2) Asset Turnover ratio=(Net sales/Average assets)
2017=(650000/((533000+600000)/2))=1.15 times
2018=(700000/((640000+600000)/2))=1.13 times
(3) EPS=Net income/Weighted average common shares
2017=(30000/31000)=0.97
2018=(45000/32000)=1.41
(4) P/E ratio=MPS/EPS
2017=5/0.97=5.15 times
2018=8/1.41=5.67 times
6 Debt to assets ratio=Debt/Asset
2017=85000/600000=14.17%
2018=80000/640000=12.5%
2017 2018 -1 Profit margin 4.62% 6.43% -2 Asset turnover 1.15 times 1.13 times -3 Earnings per share (Weighted-average common shares in 2018 were 32,000 and in 2017 were 31,000) 0.97 1.41 -4 Price-earnings ratio 5.15 times 5.67 timesRelated Questions
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