P14-3A Condensed balance sheet and income statement data for Kersenbrock Corporation appear below.
KERSENBROCK CORPORATION
Balance Sheets
December 31
2009 2008 2007
Cash $ 25,000 $ 20,000 $ 18,000
Receivables (net) 50,000 45,000 48,000
Other current assets 90,000 95,000 64,000
Investments 75,000 70,000 45,000
Plant and equipment (net) 400,000 370,000 358,000
$640,000 $600,000 $533,000
Current liabilities $ 75,000 $ 80,000 $ 70,000
Long-term debt 80,000 85,000 50,000
Common stock, $10 par 340,000 310,000 300,000
Retained earnings 145,000 125,000 113,000
$640,000 $600,000 $533,000
KERSENBROCK CORPORATION
Income Statement
For the Year Ended December 31
2009 2008
Sales $740,000 $700,000
Less: Sales returns and allowances 40,000 50,000
Net sales 700,000 650,000
Cost of goods sold 420,000 400,000
Gross profit 280,000 250,000
Operating expenses (including income taxes) 235,000 220,000
Net income $ 45,000 $ 30,000
Additional information:
1. The market price of Kersenbrock's common stock was $4.00, $5.00, and $8.00 for 2007, 2008, and 2009, respectively.
2. All dividends were paid in cash.
Instructions
a) Compute the following ratios for 2008 and 2009. (1) Profit margin.
(2) Asset turnover. (3) Earnings per share. (Weighted average common
shares in 2009 were 32,000 and in 2008 were 31,000.) (4) Price-earnings.
(5) Payout. (6) Debt to total assets.
b) Based on the ratios calculated, discuss briefly the improvement or
lack thereof in financial position and operating results from 2008 to
2009 of Kersenbrock Corporation.
Click here for the solution: Condensed balance sheet and income statement data for Kersenbrock Corporation appear below
