P15-1 Comparative statement data for Douglas Company and Maulder Company, two competitors, appear below. All balance sheet data are as of December 31, 2009, and December 31, 2008.
Douglas Company Maulder Company
2009 2008 2009 2008
Net sales $1,549,035 $339,038
Cost of goods sold 1,080,490 241,000
Operating expenses 302,275 79,000
Interest expense 8,980 2,252
Income tax expense 54,500 6,650
Current assets 325,975 $ 312,410 83,336 $ 79,467
Plant assets (net) 521,310 500,000 139,728 125,812
Current liabilities 65,325 75,815 35,348 30,281
Long-term liabilities 108,500 90,000 29,620 25,000
Common stock, $10 par 500,000 500,000 120,000 120,000
Retained earnings 173,460 146,595 38,096 29,998
Instructions
(a) Prepare a vertical analysis of the 2009 income statement data for Douglas Company and Maulder Company in columnar form.
(b) Comment on the relative profitability of the companies by computing the return on assets and the return on common stockholders’ equity ratios for both companies.
P15-6 The comparative statements of Dillon Company are presented below.
DILLON COMPANY
Income Statement
For Year Ended December 31
2009 2008
Net sales (all on accounts) $ 600,000 $ 520,000
Expenses
Cost of goods sold 415,000 354,000
Selling and administrative 120,800 114,800
Interest Expense 7,800 6,000
Income tax expense 18,000 $ 14,000
Net income 561,600 488,800
$ 38,400 $ 31,200
DILLON COMPANY
Balance Sheet
December 31
Assets 2009 2008
Current assets
Cash 21,000 18,000
Short term investments 18,000 15,000
Accounts receivable (net) 86,000 74,000
Inventory 90,000 70,000
Total Current assets 215,000 177,000
Plant assets (net) 423,000 383,000
Total assets $ 638,000 $ 560,000
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 122,000 $ 110,000
Income taxes payable 23,000 20,000
Total current liabilities $ 145,000 $ 130,000
Long term liabilities
Bonds payable 120,000 80,000
Total liabilities $ 265,000 $ 210,000
Stockholders’' equity
Common stock ($5 par) 150,000 150,000
Retained earnings 223,000 200,000
Total stockholder' equity 373,000 350,000
Total liabilities & stockholders equity $ 638,000 $ 560,000
Additional data:
The common stock recently sold at $19.50 per share.
The year-end balance in the allowance for doubtful accounts was $3,000 for 2009 and $2,400 for 2008.
Instructions
Compute the following ratios for 2009.
(a) Current. (h) Return on common stockholders’ equity.
(b) Acid-test. (i) Earnings per share.
(c) Receivables turnover. (j) Price-earnings.
(d) Inventory turnover. (k) Payout.
(e) Profit margin. (l) Debt to total assets.
(f) Asset turnover. (m) Times interest earned.
(g) Return on assets.
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