|Q2 10 BONUS POINTS Perform ratio analysis, and evaluate financial position and

Question

|Q2 10 BONUS POINTS Perform ratio analysis, and evaluate financial position and operating results. Consolidated balance sheet and income statement data for Landwehr Corporation appear below. Cash Accounts receivable (net) Other current assets Investments | Plant and equipment (net) LANDWEHR CORPORATION Balance Sheets December 31 2018 $25,000 50,000 90,000 75,000 400,000 | 6640,000 $75,000 80,000 340,000 145,000 $640,000 2017 $20,000 | 45,000 95,000 70,000 370,000 | $600,000 80,000 85,000 310,000 125,000 $600,000 2016 $18,000 48,000 64,000 145,000 358,000 * $533,000 $70,000 50,000 300,000 113,000 $533,000 Current liabilities Long-term debt Common stock, $10 par Retained earnings LANDWEHR CORPORATION Income Statement For the Years Ended December 31 Sales revenue Less: Sales returns and allowances Net sales Cost of goods sold Gross Profit Operating expenses (including income tax) Net income 2018 $740,000 40,000 700,000 420,000 280,000 235,000 $45,000 2017 $700,000 50,000 650,000 400,000 250,000 220,000 $30,000 | Additional information: |1. The market price of Landwehris common stock was $4.00, $5.00, and $8,00 for 2016, 2017, and 2018, respectively. |2. All dividends were paid in cash. Instructions (a) Compute the following ratios for 2017 and 2018. (Round ratios to one decimal point; round earnings per share

Explanation / Answer

Dividends are the returns given to shareholders from the retained profits of the corporation. Hence the difference in the balance of retained earnings will always be the dividends paid for the year. Retained earnings statement usually looks like -

Beginning balance + Income for the year - Dividends paid / declared if any = Ending balance

Dividends paid = Beginning balance + Income for the year - Ending balance

For 2017

Dividends paid = $113000 + $30000 - $125000 = $18000

Payout ratio = 18000 / 30000 = 60%

For 2018

Dividends paid = $125000 + $45000 - $145000 = $25000

Payout ratio = 25000 / 45000 = 55.55%

Debts to Assets ratio = Total Liabilities / Total Assets

For 2017

Debt to Asset ratio = ($80000 + $85000) / $600000 = 27.5%

For 2018

Debt to Asset ratio = ($75000 + $80000) / $640000 = 24.22%

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.