Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 16-12
Requirement 1:
SABIN ELECTRONICS
Ratios

Current assets
Current liabilities
Working capital

Current assets
Current liabilities
Current ratio

$
$

Quick assets
Current liabilities
Acid-test ratio

$
$

Sales on account
Average receivables
Accounts receivable turnover
Average collection period

$
$

Cost of goods sold

Average inventory
Inventory turnover
Average sales period

$
$

Total liabilities
Stockholders' equity
Debt-to-equity ratio

$
$

Net income before interest and taxes

Interest expense
Times interest earned

$
$

This Year
1,520,000
800,000
720,000
Correct!
1,520,000
800,000
1.90
Correct!
550,000
800,000
0.69
Correct!
5,000,000
390,000
12.8
28.5
Correct!
3,875,000
775,000
5.0
73.0
Correct!
1,400,000
1,600,000
0.875
Correct!
472,000
72,000
6.6
Correct!

$
$
$
$
to 1
$
$
to 1
$
$
times
days
$
$
times
days
$
$
to 1
$
$
times

Last Year
1,090,000
430,000
660,000
Correct!
1,090,000
430,000
2.53
Correct!
468,000
430,000
1.09
Correct!
4,350,000
275,000
15.8
23.1
Correct!
3,450,000
550,000
6.3
57.9
Correct!
1,030,000
1,430,000
0.720
Correct!
352,000
72,000
4.9
Correct!

to 1

to 1

times
days

times
days

to 1

times

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 16-12
Requirement 2a:
SABIN ELECTRONICS
Common-Size Balance Sheets
This Year
Current assets:
Cash
Marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Plant and equipment, net
Total assets

Current liabilities
Bonds payable, 12%
Total liabilities
Stockholders' equity:
Preferred stock, $25 par, 8%
Common stock, $10 par
Retained earnings
Total stockholders' equity
Total liabilities and equity

2.3%

Last Year

16.0%
31.7%
0.7%
50.7%
49.3%
100.0%
Correct!

6.1%
0.7%
12.2%
24.4%
0.9%
44.3%
55.7%
100.0%
Correct!

26.7%
20.0%
46.7%

17.5%
24.4%
41.9%

8.3%
16.7%
28.3%
53.3%
100.0%
Correct!

10.2%
20.3%
27.6%
58.1%
100.0%
Correct!

Requirement 2b:
SABIN ELECTRONICS
Common-Size Income Statements

Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
Interest expense
Net income before taxes
Income taxes
Net income

This Year
100.0%
77.5%
22.5%
13.1%
9.4%
1.4%
8.0%
2.4%
5.6%
Correct!

Last Year
100.0%
79.3%
20.7%
12.6%
8.1%
1.7%
6.4%
1.9%
4.5%
Correct!

Given Data P16-12:

Requested loan amount

$500,000
SABIN ELECTRONICS
Comparative Balance Sheet
This Year

Last Year

Assets
Current assets:
Cash
Marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Plant and equipment, net
Total assets

70,000
480,000
950,000
20,000
1,520,000
1,480,000
3,000,000

Liabilities and Stockholders' Equity

Liabilities:
Current liabilities
$
800,000
Bonds payable, 12%
600,000
Total liabilities
1,400,000
Stockholders' equity:
Preferred stock, $25 par, 8%
250,000
Common stock, $10 par
500,000
Retained earnings
850,000
Total stockholders' equity
1,600,000
Total liabilities and stockholders' equity
$ 3,000,000

150,000
18,000
300,000
600,000
22,000
1,090,000
1,370,000
2,460,000

430,000
600,000
1,030,000
250,000
500,000
680,000
1,430,000
2,460,000

SABIN ELECTRONICS
Comparative Income Statement

Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
Interest expense
Net income before taxes
Income taxes (40%)
Net income
Dividends paid:
Preferred dividends
Common dividends
Total dividends paid
Net income retained
Retained earnings, beginning of year
Retained earnings, end of year

This Year
5,000,000
3,875,000
1,125,000
653,000
472,000
72,000
400,000
120,000
280,000
20,000
90,000
110,000
170,000
680,000
850,000

Last Year
4,350,000
3,450,000
900,000
548,000
352,000
72,000
280,000
84,000
196,000
20,000
75,000
95,000
101,000
579,000
680,000

Given Data P16-12:

Typical ratios:
Current ratio
Acid-test ratio
Average collection period
Average sale period
Debt-to-equity ratio
Times interest earned ratio
Return on total assets
Price-earnings ratio
Accounts receivable, beginning of last year
Inventory, beginning of last year

2.5
1.3
18
60
0.90
6.0
13%
12
$
$

250,000
500,000

to 1
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days
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Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 16-14
LYDEX COMPANY
Rates of Return
Requirement 1a.
Net income
Add after-tax cost of interest:
Total
Average total assets
Return on total assets

$
$
$

Requirement 1b.
Net income
Less preferred dividends
Net income remaining for common
Average total stockholders' equity
Less average preferred stock
Average common equity
Return on common equity

$
$
$
$

This Year
840,000 $
252,000
1,092,000 $
15,990,000 $
6.8%
Correct!
840,000
144,000
696,000
Correct!
9,360,000
1,800,000
7,560,000
9.2%
Correct!

$
$
$
$

Last Year
504,000
210,000
714,000
13,920,000
5.1%
Correct!
504,000
144,000
360,000
Correct!
9,084,000
1,800,000
7,284,000
4.9%
Correct!

LYDEX COMPANY
Stockholders' Well Being
Requirement 2a:
Net income remaining for common
Average number of common shares
Earnings per share

$
$

696,000
75,000
9.28
Correct!

$
$

360,000
75,000
4.80
Correct!

Requirement 2b:
Dividends per share
Market price per share
Dividend yield ratio

$
$

2.88 $
72.00 $
4.0%
Correct!

1.44
40.00
3.6%
Correct!

Requirement 2c:
Dividends per share
Earnings per share
Dividend payout ratio

$
$

2.88 $
9.28 $
31.0%
Correct!

1.44
4.80
30.0%
Correct!

Requirement 2d:
Market price per share
Earnings per share
Price-earnings ratio

$
$

72.00
9.28
7.8
Correct!

$
$

40.00
4.80
8.3
Correct!

9,600,000
1,800,000
7,800,000
75,000
104.00
Correct!

9,120,000
1,800,000
7,320,000
75,000
97.60
Correct!

3,150,000
15,750,000

Requirement 2e:
Stockholders' equity
Less preferred stock
Common stockholders' equity
Number of common shares
Book value per share
Requirement 2f:
Gross margin
Sales

$
$

$
$

2,580,000
12,480,000

Gross margin percentage

20.0%
Correct!

20.7%
Correct!

Requirement 3:
LYDEX COMPANY
Ratios

Current assets
Current liabilities
Working capital

Current assets
Current liabilities
Current ratio

$
$

Quick assets
Current liabilities
Acid-test ratio

$
$

Sales on account
Average receivables
Accounts receivable turnover
Average collection period

$
$

Cost of goods sold

Average inventory
Inventory turnover ratio
Average sale period

$
$

Total liabilities
Stockholders' equity
Debt-to-equity ratio

$
$

Net income before interest and taxes

Interest expense
Times interest earned

$
$

This Year
7,800,000
3,900,000
3,900,000
Correct!
7,800,000
3,900,000
2.00
Correct!
3,660,000
3,900,000
0.94
Correct!
15,750,000
2,250,000
7.0
52.1
Correct!
12,600,000
3,150,000
4.0
91.3
Correct!
7,500,000
9,600,000
0.78
Correct!
1,560,000
360,000
4.3
Correct!

$
$
$
$
$
to 1
$
$
to 1
$
$
times
days
$
$
times
days
$
$
to 1
$
$
times

Last Year
5,940,000
2,760,000
3,180,000
Correct!
5,940,000
2,760,000
2.15
Correct!
3,360,000
2,760,000
1.22
Correct!
12,480,000
1,680,000
7.4
49.3
Correct!
9,900,000
2,160,000
4.6
79.3
Correct!
5,760,000
9,120,000
0.63
Correct!
1,020,000
300,000
3.4
Correct!

to 1

to 1

times
days

times
days

to 1

times

Given Data SP16-14:

Requested loan amount

3,000,000

LYDEX COMPANY
Comparative Balance Sheet
This Year

Last Year

Assets
Current assets:
Cash
Marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Plant and equipment, net
Total assets

$960,000
2,700,000
3,900,000
240,000
7,800,000
9,300,000
17,100,000

Liabilities and Stockholders' Equity

Liabilities:
Current liabilities
$
3,900,000
Note payable, 10%
3,600,000
Total liabilities
7,500,000
Stockholders' equity:
Preferred stock, 8%, $30 par value
1,800,000
Common stock, $80 par value
6,000,000
Retained earnings
1,800,000
Total stockholders' equity
9,600,000
Total liabilities and stockholders' equity
$ 17,100,000

$1,260,000
300,000
1,800,000
2,400,000
180,000
5,940,000
8,940,000
14,880,000

2,760,000
3,000,000
5,760,000
1,800,000
6,000,000
1,320,000
9,120,000
14,880,000

LYDEX COMPANY
Comparative Income Statement

Sales (all on account)

cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income
Dividends paid:
Preferred dividends
Common dividends
Total dividends paid
Net income retained
Retained earnings, beginning of year
Retained earnings, end of year

This Year
15,750,000
12,600,000
3,150,000
1,590,000
1,560,000
360,000
1,200,000
360,000
840,000
144,000
216,000
360,000
480,000
1,320,000
1,800,000

Last Year
12,480,000
9,900,000
2,580,000
1,560,000
1,020,000
300,000
720,000
216,000
504,000
144,000
108,000
252,000
252,000
1,068,000
1,320,000

Given Data SP16-14:

Tax rate
Percentage increase in sales
Common stock price, last year
Common stock price, this year

$
$

Typical ratios:
Current ratio
Acid-test ratio
Average collection period
Average sale period
Return on assets
Debt-to-equity ratio
Times interest earned ratio
Price-earnings ratio
Total assets beginning last year
Stockholders' equity beginning last year
Accounts receivable, beginning of last year
Inventory, beginning of last year

30%
25%
40
72

2.3
1.2
30
60
9.5%
0.65
5.7
10
$
$
$
$

12,960,000
9,048,000
1,560,000
1,920,000

to 1
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days
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Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 16-18
PEPPER INDUSTRIES
Computations
Interest expense
Times interest earned
Earnings before interest & taxes

Earnings before interest & taxes

Interest expense
Net income before taxes
Income tax expense
Net income

$
$
$
$
$

Sales on account
Average accounts receivable balance
Accounts receivable turnover
Ending accounts receivable balance

$
$

Quick assets
Current liabilities
Acid-test ratio
Cash

$
$

Current assets
Current liabilities
Current ratio
Inventory

$
$

Average inventory
Inventory turnover
Cost of goods sold

Gross margin

Gross margin
Net operating income
Operating expenses

$
$
$

Interest expense
Interest rate
Bonds payable

Current liabilities
Bonds payable
Total liabilities

$
$
$

Net income, less preferred stock

Common shares outstanding
Earnings per share
Total common stock

$
$

80,000
6.75
540,000
Correct!
540,000
80,000
460,000
138,000
322,000
Correct!
4,200,000
300,000
14.0
330,000
Correct!
400,000
320,000
1.25
70,000
Correct!
880,000
320,000
2.75
480,000
Correct!
420,000
6.5
2,730,000
Correct!
1,470,000
Correct!
1,470,000
540,000
930,000
Correct!
80,000
10%
800,000
Correct!
320,000
800,000
1,120,000
Correct!
322,000
140,000
2.30
700,000
Correct!

times

times

to 1

to 1

times

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 16-18
Total liabilities
Debt-to-equity ratio
Stockholders' equity

Total stockholders' equity

Common stock
Retained earnings

$
$
$

Liabilities
Stockholders' equity
Total assets

$
$
$

Total assets
Current assets
Plant & equipment

$
$
$

1,120,000
0.875
1,280,000
Correct!
1,280,000
700,000
580,000
Correct!
1,120,000
1,280,000
2,400,000
Correct!
2,400,000
880,000
1,520,000
Correct!

PEPPER INDUSTRIES
Income Statement
For the Year Ended March 31
Sales
Less cost of goods sold
Gross margin
Less operating expenses
Net operating income
Less interest expense
Net income before taxes
Less income taxes
Net income

$4,200,000
2,730,000
1,470,000
930,000
540,000
80,000
460,000
138,000
$322,000
Correct!

PEPPER INDUSTRIES
Balance Sheet
March 31
Current assets:
Cash
Accounts receivable, net
Inventory
Total current assets
Plant and equipment
Total assets
Current liabilities
Bonds payable, 10%
Total liabilities
Stockholders' equity:
Common stock, $2.50 par value
Retained earnings
Total stockholders' equity
Total liabilities and equity

$70,000
330,000
480,000
880,000
1,520,000
$2,400,000
$320,000
800,000
1,120,000
700,000
580,000
1,280,000
$2,400,000

Student Name: Instructor

Class: McGraw-Hill/Irwin
Problem 16-18
Correct!

Given Data P16-18

PEPPER INDUSTRIES
Balance Sheet
March 31
Current assets:
Cash
Accounts receivable, net
Inventory
Total current assets
Plant and equipment, net
Total assets
Liabilities
Current liabilities
Bonds payable, 10%
Total liabilities
Stockholders' equity:
Common stock, $5 par value
Retained earnings
Total stockholders' equity
Total liabilities and equity

?
?
?
?
?
?

320,000
?
?
?
?
?
?

PEPPER INDUSTRIES
Income Statement
For the Year Ended March 31
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income

4,200,000
?
?
?
?
80,000
?
?
?

Tax rate

30%

Selected financial ratios computed from above stmts:

Earnings per share
$
Debt-to-equity ratio
Accounts receivable turnover
Current ratio
Return on total assets
Times interest earned
Acid-test ratio
Inventory turnover
Balances at beginning of current year:
Accounts receivable
Inventory
Total assets

$
$
$

2.30
0.875
14.0
2.75
18%
6.8
1.25
6.5

270,000
360,000
1,800,000

to 1
times
to 1
times
to 1
times