Question

The following financial information is for Wildhorse Company.

WILDHORSE COMPANY Balance Sheets December 31
Assets		2017		2016
Cash		$  70,000		$  68,000
Debt investments (short-term)		51,000		40,000
Accounts receivable		109,000		91,000
Inventory		231,000		167,000
Prepaid expenses		27,000		26,000
Land		134,000		134,000
Building and equipment (net)		264,000		186,000
Total assets		$ 886,000		$ 712,000
Liabilities and Stockholders’ Equity
Notes payable		$ 171,000		$ 109,000
Accounts payable		67,000		53,000
Accrued liabilities		41,000		41,000
Bonds payable, due 2017		250,000		170,000
Common stock, $10 par		206,000		206,000
Retained earnings		151,000		133,000
Total liabilities and stockholders’ equity		$ 886,000		$ 712,000

WILDHORSE COMPANY Income Statements For the Years Ended December 31
		2017		2016
Sales revenue		$ 899,000		$ 798,000
Cost of goods sold		650,000		575,000
Gross profit		249,000		223,000
Operating expenses		192,000		168,000
Net income		$  57,000		$  55,000

Additional information:

1.		Inventory at the beginning of 2016 was $ 117,000.
2.		Accounts receivable (net) at the beginning of 2016 were $ 90,000.
3.		Total assets at the beginning of 2016 were $ 634,000.
4.		No common stock transactions occurred during 2016 or 2017.
5.		All sales were on account.

(a1)

Compute the liquidity and profitability ratios of Wildhorse Company for 2016 and 2017. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%. If % change is a decrease show the numbers as negative, e.g. -1.83% or (1.83%).)

		2016			2017			% Change
LIQUIDITY
Current ratio		enter the current ratio	:1		enter the current ratio	:1		enter percentages	%
Accounts receivables turnover		enter accounts receivables turnover in times	times		enter accounts receivables turnover in times	times		enter percentages	%
Inventory turnover		enter inventory turnover in times	times		enter inventory turnover in times	times		enter percentages	%

		2016			2017			% Change
PROFITABILITY
Profit margin		enter percentages	%		enter percentages	%		enter percentages	%
Asset turnover		enter asset turnover in times	times		enter asset turnover in times	times		enter percentages	%
Return on assets		enter percentages	%		enter percentages	%		enter percentages	%
Earnings per share		$ enter a dollar amount			$ enter a dollar amount			enter percentages	%

Answer 1

	Current rato=Current assets/Current liabilities
	Current assets=Cash+Debt investments+Accounts receivable+Inventory+Prepaid expense
	Current liabilities=Accounts payable+Accrued liabilities
					2016	2017
	Cash			(a)	68000	70000
	Debt investments			(b)	40000	51000
	Accounts receivable			©	91000	109000
	Inventory			(d)	167000	231000
	Prepaid expenses			(e)	26000	27000
	Current assets			(f)=(a)+(b)+©+(d)+€	392000	488000
	Accounts payable			(g)	53000	67000
	Accrued liabilities			(h)	41000	41000
	Current liabilites			(i)=(g)+(h)	94000	108000
	Current ratio			(d)/(e)	4.17	4.52
	Accounts receivable turnover ratio=Net credit sales/Average accounts receivable
	Here, all sales are on account.Hence,Credit sales=Sales revenue
	Average accounts receivable=(Beg.bal of accounts receivable+End. Bal of accounts receivable)/2
					2016	2017
	Sales revenue			(a)	798000	899000
	Beg.bal of accounts receivable			©	90000	91000
	End.bal of accounts receivable			(d)	91000	109000
	Average accounts receivable			€=(c+d)/2	90500	100000
	Accounts receivable turnover ratio			(a)/€	8.82	8.99
	Inventory turnover=Cost of goods sold/Average inventories
	Average inventories=(Beg.bal of inventories+End. Bal of inventories)/2
					2016	2017
	Cost of goods sold			(a)	575000	650000
	Beg.bal of inventories			(b)	117000	167000
	End.bal of inventories			(c)	167000	231000
	Average inventories			(d)=(a+b)/2	142000	199000
	Inventory turnover			(a)/(d)	4.05	3.27
	Summary of Liquidity ratios:
					2016	2017	% change
	Current ratio				4.17	4.52	8.39%
							(4.52-4.17)/4.17
	Accounts receivables turnover				8.82	8.99	1.93%
							(8.99-8.82)/8.82
	Inventory turnover				4.05	3.27	-19.26%
							(3.27-4.05)/4.05
	Profit margin =Net income/Sales revenue
					2016	2017
	Net income			(a)	55000	57000
	Sales revenue			(b)	798000	899000
	Profit margin ratio			(a)/(b)	6.89%	6.34%
	Asset turnover ratio=Net sales/Average total assets
	Average total assets=(Beg.bal of total assets+End. Bal of total assets)/2
					2016	2017
	Sales revenue			(a)	798000	899000
	Beg. Bal of total assets			(b)	634000	712000
	End. Bal of total assets			©	712000	886000
	Average total assets			(d)=(b+c)/2	673000	799000
	Asset turnover ratio			€	1.19	1.13
	Return on assets=Earnings before interest and tax(EBIT)/Avergae total assets
	Due to lack of information, take EBIT=Net income
					2016	2017
	Net income			(a)	55000	57000
	Average total assets			(b)	673000	799000
	Return on assets			(a)/(b)	8.17%	7.13%
	Earnings per share=Net income/Number of common shares
	Number of common shares=Common stock/Par value of common shares
					Ernst company	Young company
	Net income			(a)	55000	57000
	Common stock			(b)	206000	206000
	Par value			©	10	10
	Number of common shares			(d)=(b)/©	20600	20600
	Earnings per share ($)			(a)/(d)	2.67	2.77
	Summary of profitability ratios:
					2016	2017	% change
	Profit margin				6.89%	6.34%	-7.98%
							(6.34-6.89)/6.89
	Asset turnover				1.19	1.13	-5.04%
							(1.13-1.19)/1.19
	Return on assets				8.17%	7.13%	-12.73%
							(7.13-8.17)/8.17
	Earnings per share				2.67	2.77	3.75%
							(2.77-2.67)/2.67
	I appreciate your ratings