Condensed balance sheet and income statement data for Landwehr Corporation appea

Question

Condensed balance sheet and income statement data for Landwehr Corporation appear below.

LANDWEHR CORPORATION
Balance Sheets
December 31

2016

2015

2014

LANDWEHR CORPORATION
Income Statement
For the Years Ended December 31

2016

2015

Additional information:

(a)

Compute the following ratios for 2015 and 2016. (Round Earnings per share to 2 decimal places, e.g.1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.)

2015

2016

LANDWEHR CORPORATION
Balance Sheets
December 31

2016

2015

2014

Cash $ 25,100 $ 16,700 $ 18,100 Accounts receivable (net) 49,300 45,400 47,600 Other current assets 91,000 95,300 63,100 Investments 75,300 70,000 44,400 Plant and equipment (net) 399,700 370,800 357,500 $640,400 $598,200 $530,700 Current liabilities $74,200 $80,900 $69,200 Long-term debt 80,200 84,200 50,100 Common stock, $10 par 382,600 309,300 299,000 Retained earnings 103,400 123,800 112,400 $640,400 $598,200 $530,700

Explanation / Answer

2015

1) Profit margin = Net income/Net sales

Profit margin = 38300/656600

Profit margin = 5.8%

2) Asset turnover = Net sale/Average total asset

Asset turnover = 656600 / ((598200+530700)/2)

Asset turnover= 1.2

3)Earnings per share = (Net Income-prefered dividend)/Weighted-average common shares

Earnings per share = (38300-0)/31200

Earnings per share = 1.23

4) Price-earnings ratio = Price/EPS

Price-earnings ratio = 6/1.23

Price-earnings ratio = 4.9 times

5)

Addition to retained earning = Ending retained earning - Beginning retained earning

Addition to retained earning = 123800-112400

Addition to retained earning = 11400

Dividend = Net Income - Addition to retained earning

Dividend = 38300 - 11400

Dividend = 26900

Payout ratio = Dividend/Net Income

Payout ratio = 26900/38300

Payout ratio = 70.2%

6) Debt to assets ratio = Long-term debt/Total Asset

Debt to assets ratio = 84200/598200

Debt to assets ratio = 14.1%

2016

1) Profit margin = Net income/Net sales

Profit margin = 72200/703500

Profit margin = 10.3%

2) Asset turnover = Net sale/Average total asset

Asset turnover = 703500 / ((598200+640400)/2)

Asset turnover= 1.1

3)Earnings per share = (Net Income-prefered dividend)/Weighted-average common shares

Earnings per share = (72200-0)/34200

Earnings per share = 2.11

4) Price-earnings ratio = Price/EPS

Price-earnings ratio = 8/2.11

Price-earnings ratio = 3.8 times

5)

Addition to retained earning = Ending retained earning - Beginning retained earning

Addition to retained earning = 103400-123800

Addition to retained earning = -20400

Dividend = Net Income - Addition to retained earning

Dividend = 72200 - (-20400)

Dividend = 92600

Payout ratio = Dividend/Net Income

Payout ratio = 92600/72200

Payout ratio = 128.3%

6) Debt to assets ratio = Long-term debt/Total Asset

Debt to assets ratio = 80200/640400

Debt to assets ratio = 12.5%

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