Question

Ratio Analysis of Comparative Financial Statements

Amounts from the comparative income statement and balance sheet of Miller Electronics Corporation for the last two years are as follows:

Miller Electronics Corporation Comparative Income Statement For Years Ended December 31, 20-2 and 20-1
	20-2		20-1
Net Sales (all on account)		$654,280		$421,080
Cost of goods sold		398,290		263,480
Gross profit		$255,990		$157,600
Administrative expenses		$64,477		$43,209
Selling expenses		66,603		43,981
Total operating expenses		$131,080		$87,190
Operating income		$124,910		$70,410
Interest expense		1,251		1,170
Income before income taxes		$123,659		$69,240
Income tax expense		30,188		13,723
Net income		$93,471		$55,517

Miller Electronics Corporation Comparative Balance Sheet December 31, 20-2 and 20-1
	20-2		20-1
Assets
Current assets:
Cash		$42,733		$21,917
Receivables (net)		72,162		46,640
Merchandise inventory		91,216		49,819
Supplies and prepayments		3,680		1,162
Total current assets		$209,791		$119,538
Property, plant, and equipment:
Office equipment (net)		$12,249		$8,630
Factory equipment (net)		104,554		70,930
Total property, plant, and equipment		116,803		$79,560
Total assets		$326,594		$199,098
Liabilities
Current liabilities
Notes payable		$10,280		$5,880
Accounts payable		43,518		30,108
Accrued and withheld payroll taxes		6,371		5,491
Total current liabilities		$60,169		$41,479
Stockholders' Equity
Common stock ($10 par)		$100,000		$84,000
Retained earnings		166,425		73,619
Total stockholders' equity		$266,425		$157,619
Total liabilities and stockholders' equity		$326,594		$199,098

Required:

Calculate the following ratios and amounts for 20-1 and 20-2. Round all calculations to two decimal places. Use 365 days when computing the accounts receivable and merchandise inventory turnover.

(a)	Return on assets (Total assets on January 1, 20-1, were $167,728.)
(b)	Return on common stockholders' equity (Total common stockholders' equity on January 1, 20-1, was $106,809.)
(c)	Earnings per share of common stock (The average numbers of shares outstanding were 8,400 shares in 20-1 and 9,200 in 20-2.)
(d)	Book value per share of common stock
(e)	Quick ratio
(f)	Current ratio
(g)	Working capital
(h)	Receivables turnover (Net receivables on January 1, 20-1, were $37,450.)
(i)	Merchandise inventory turnover (Merchandise inventory on January 1, 20-1, was $47,619.)
(j)	Debt-to-equity ratio
(k)	Asset turnover (Assets on January 1, 20-1, were $167,728.)
(l)	Times interest earned ratio
(m)	Profit margin ratio
(n)	Assets-to-equity ratio
(o)	Price-earnings ratio (The market price of the common stock was $100.00 and $85.00 on December 31, 20-2 and 20-1, respectively.)

a. Return on assets:
20-2	%
20-1	%
b. Return on common stockholders' equity:
20-2	%
20-1	%
c. Earnings per share of common stock:
20-2	$
20-1	$
d. Book value per share of common stock:
20-2	$
20-1	$
e. Quick ratio:
20-2	to 1
20-1	to 1
f. Current ratio:
20-2	to 1
20-1	to 1
g. Working capital:
20-2	$
20-1	$
h. Receivables turnover:
20-2	days
20-1	days
i. Merchandise inventory turnover:
20-2	days
20-1	days
j. Debt-to-equity ratio:
20-2	to 1
20-1	to 1
k. Asset turnover:
20-2	to 1
20-1	to 1
l. Times interest earned ratio:
20-2	times
20-1	times
m. Profit margin ratio:
20-2	%
20-1	%
n. Assets-to-equity ratio:
20-2	to 1
20-1	to 1
o. Price-earnings ratio:
20-2
20-1

Answer 1