Problem 9-3 Condensed balance sheet and income statement data for Martinez Corpo
ID: 2332603 • Letter: P
Question
Problem 9-3
Condensed balance sheet and income statement data for Martinez Corporation are presented here.
MARTINEZ CORPORATION
Balance Sheets
December 31
2017
2016
2015
$ 32,000
$ 22,000
$ 20,000
52,000
47,000
50,000
94,000
99,000
68,000
59,000
74,000
49,000
500,000
370,000
358,000
$737,000
$612,000
$545,000
$ 87,000
$ 82,000
$ 72,000
149,000
89,000
54,000
324,000
314,000
304,000
177,000
127,000
115,000
$737,000
$612,000
$545,000
MARTINEZ CORPORATION
Income Statements
For the Years Ended December 31
2017
2016
$744,000
$604,000
42,000
32,000
702,000
572,000
429,000
354,000
273,000
218,000
182,000
152,000
$ 91,000
$ 66,000
Additional information:
(a) Compute the following ratios for 2016 and 2017. (Round earnings per share and asset turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 1.8%.)
2017
2016
MARTINEZ CORPORATION
Balance Sheets
December 31
2017
2016
2015
Cash$ 32,000
$ 22,000
$ 20,000
Accounts receivable (net)52,000
47,000
50,000
Other current assets94,000
99,000
68,000
Investments59,000
74,000
49,000
Plant and equipment (net)500,000
370,000
358,000
$737,000
$612,000
$545,000
Current liabilities$ 87,000
$ 82,000
$ 72,000
Long-term debt149,000
89,000
54,000
Common stock, $10 par324,000
314,000
304,000
Retained earnings177,000
127,000
115,000
$737,000
$612,000
$545,000
Explanation / Answer
Solution 9-3a:
Profit Margin = Net Profit / Net Sales
2017 = $91,000 / $702,000 = 12.9%
2016 = $66,000 / $572,000 = 11.5%
Gross Profit rate = Gross profit / Net Sales
2017 = $273,000 / $702,000 = 38.9%
2016 = $218,000 / $572,000 = 38.1%
Assets Turnover = Net Sales / Average total assets
2017 = $702,000 / ($737,000 + $612,000)/2 = 1.04 times
2016 = $572,000 / ($612,000 + $545,000)/2 = 0.99 times
Earning per share = Net Income / Weighted average outstanding shares
2017 = $91,000 / (32400 + 31400)/2 = $2.85 per share
2016 = $66,000 / (31400 + 30400)/2 = $2.14 per share
Price earning ratio = Market price per share / Earning per share
2017 = $8.50 / $2.85 = 3.0 times
2016 = $7.50 / $2.14 = 3.5 times
Payout ratio = Dividend / Net Income
Dividend in 2017 = $127,000 + $91,000 - $177,000 = $41,000
Dividend in 2016 = $115,000 + $66,000 - $127,000 = $54,000
Payout ratio 2017 = $41,000 / $91,000 = 45.1%
Payout ration 2016 = $54,000 / $66,000 = 81.8%
Debt to Assets ratio = Debt / Total assets
2017 = ($87,000 + $149,000) / $737,000 = 32.0%
2016 = ($82,000 + $89,000) / $612,000 = 27.9%
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