Selected data from the 2016 statements follows: Accounts receivable (net) Inventory Long-term debt Other data: $20,000 92,000 60,000 $ 40,000 48,000 70,000 Share price at end of 2017 $4 18 $4 15 Income tax rate 30% 30% Dividends declared and paid in 2017 Number of common shares during 2017 $36,000 15,000 $150,000 50,000 The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years, and each has had steady growth. The management of each has a different viewpoint in many respects. Blair Company is more conservative, and as its president said, "We avoid what we consider to be undue risk." Neither company is publicly held. Armstrong Company has an annual audit by an independent auditor, but Blair Company does not. Required: 1. Complete a schedule that reflects a ratio analysis of each company. Use ending balances if average balances are not available. (Round intermediate calculations and final answers to 2 decimal places.) Ratio Armstrong Company Blair Company Tests of profitability: Return on equity 30.00 % 45.00 % Return on assets 11.25 % 11.25 % Financial leverage percentage % Earnings per share %24 3.00 per share 24 1.80 per share Profit margin 10.00 % 11.11 % Fixed asset turnover 2.00 times 1.14 times Tests of liquidity: Cash ratio Current ratio 1.75 1.84 Quick ratio
Selected data from the 2016 statements follows: Accounts receivable (net) Inventory Long-term debt Other data: $20,000 92,000 60,000 $ 40,000 48,000 70,000 Share price at end of 2017 $4 18 $4 15 Income tax rate 30% 30% Dividends declared and paid in 2017 Number of common shares during 2017 $36,000 15,000 $150,000 50,000 The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years, and each has had steady growth. The management of each has a different viewpoint in many respects. Blair Company is more conservative, and as its president said, "We avoid what we consider to be undue risk." Neither company is publicly held. Armstrong Company has an annual audit by an independent auditor, but Blair Company does not. Required: 1. Complete a schedule that reflects a ratio analysis of each company. Use ending balances if average balances are not available. (Round intermediate calculations and final answers to 2 decimal places.) Ratio Armstrong Company Blair Company Tests of profitability: Return on equity 30.00 % 45.00 % Return on assets 11.25 % 11.25 % Financial leverage percentage % Earnings per share %24 3.00 per share 24 1.80 per share Profit margin 10.00 % 11.11 % Fixed asset turnover 2.00 times 1.14 times Tests of liquidity: Cash ratio Current ratio 1.75 1.84 Quick ratio
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The 2017 financial statements for Armstrong and Blair companies are summarized
below:
Blair
Armstrong
Company
Company
Statement of Financial Position
$35,000
40,000
100,000
140,000
85,000
$ 22,000
30,000
40,000
400,000
308,000
Cash
Accounts receivable (net)
Inventory
Property, plant, and equipment (net)
Other non-current assets
Total assets
$ 400,000
$ 800,000
$ 100,000
60,000
150,000
30,000
60,000
$ 50,000
70,000
500,000
110,000
70,000
Current liabilities
Long-term debt (10%)
Share capital
Contributed surplus
Retained earnings
Total liabilities and shareholders' equity
$ 400,000
$ 800,000
Statement of Earnings
Sales revenue (1/3 on credit)
Cost of sales
$ 450,000
(245,000)
(160,000)
$ 810,000
(405,000)
(315,000)
Expenses (including interest and income tax)
Net earnings
$ 45,000
$ 90,000
Selected data from the 2016 statements follows:
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nework Assignment i
Selected data from the 2016 statements follows:
Accounts receivable (net)
Inventory
Long-term debt
Other data:
$20,000
92,000
60,000
$ 40,000
48,000
70,000
Share price at end of 2017
$ 18
$ 15
Income tax rate
30%
30%
Dividends declared and paid in 2017
Number of common shares during 2017
$36,000
15,000
$150,000
50,000
The companies are in the same line of business and are direct competitors in a large
metropolitan area. Both have been in business approximately 10 years, and each has
had steady growth. The management of each has a different viewpoint in many
respects. Blair Company is more conservative, and as its president said, "We avoid
what we consider to be undue risk." Neither company is publicly held. Armstrong
Company has an annual audit by an independent auditor, but Blair Company does not.
Required:
1. Complete a schedule that reflects a ratio analysis of each company. Use ending
balances if average balances are not available. (Round intermediate calculations
and final answers to 2 decimal places.)
Ratio
Armstrong Company
Blair Company
Tests of profitability:
Return on equity
30.00 %
45.00 %
Return on assets
11.25 %
11.25 %
Financial leverage percentage
Earnings per share
24
3.00 per share
$ 1.80 per share
Profit margin
10.00 %
11.11 % -
Fixed asset turnover
2.00 times
1.14 times
Tests of liquidity:
Cash ratio
Current ratio
1.75
1.84
Quick ratio
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1 of 2
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