Fall 2017-18 Final Examination Ques. C2 Following is the condensed balance sheet

Question

Fall 2017-18 Final Examination Ques. C2 Following is the condensed balance sheet and Income statement of Jernigan Corporation. JERNIGAN CORPORATION Balance Sheets December 31 2015 Cash Accounts receivables (net) Other curent assets $30,000 $20,000 | s1 8,000 48,000 95,000 90,000 55,000 Plant and equiment (net) Total $85,000 $80,000! S70000 Current liabilities Long-term debt Common stock $10 par Retained eamings 145,00085,000 50,000 320,000310,000 300,000 175,000 125,000 113,000 Total JERNIGAN CORPORATION Income Statement For the Years Ended December 31 2016 2015 $740,000$600,000 30,000 Sales revenue Less: Sales returns and allowances Net sales Cost of goods sold Gross profit Operating expenses (ncluding income taxes) 40,000 700,000570,000 425000 350,000 275,000 220,000 180,000150,000 95,000 $70,000 Net income Additional information 1· The market price for Jernigan's common stock was $7.00, S7.50 and $8.50 for 2014, 2015 and 2016 respectively 2. You must compute dividends paid. All dividends are paid in cash Instruction: You are required to compute i. Profit margin ratio for 2015 and 2016 ii. Gross profit rate for 2015 and 2016 ii. Assets turnover ratio for 2015 and 2016 Page 8 q

Explanation / Answer

i) Net Profit Margin (2015) = Net profit / Sales Revenue = 70000/600000 = 0.1167

Net profit Margin (2016) = 95000/740000 = 0.1284

ii) Gross Profit Rate (2015) = Gross Profit/ Sales Revenue = 220000/600000 = 0.367

Gross Profit Rate (2015) = Gross Profit / Sales Revenue =  275000/740000 = 0.372

iii) Asset Turnover Ratio = Net Sales/ Average Total Asset

Average Total Asset (2015) = (533,000+600,000)/2 = 1,133,000/2 = 5,66,500

Asset Turnover Ratio (2015) = 600000/566500 = 1.059

Average Total Asset (2016) = (600000+725000)/2 = 1325000/2 = 662,500

Asset Turnover Ratio (2016) = 740000/662500 = 1.12

iv) Earnings per share Ratio = Net income/ Number of shares

Number of shares is not given.

Assuming 2013 as base year.

$10 being the face value, Total of Common Equity = $300,000

Number of shares = 300000/10 = 30000

Earning per share (2015) = 70000/30000 = $2.33

EPS (2016) = 95000/30000 = $3.167

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