Pinnacle Plus declared and paid a cash dividend of $9,100 in the current year. Its comparative...

Pinnacle Plus declared and paid a cash dividend of $9,100 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information:

	Current Year		Previous Year
Income Statement
Sales Revenue	$	235,000	$	199,000
Cost of Goods Sold		102,000		98,000
Gross Profit		133,000		101,000
Operating Expenses		61,000		53,000
Interest Expense		6,500		6,500
Income before Income Tax Expense		65,500		41,500
Income Tax Expense (30%)		19,650		12,450
Net Income	$	45,850	$	29,050
Balance Sheet
Cash	$	102,125	$	13,000
Accounts Receivable, Net		42,000		37,000
Inventory		50,000		63,000
Property and Equipment, Net		120,000		130,000
Total Assets	$	314,125	$	243,000
Accounts Payable	$	67,000	$	32,500
Income Tax Payable		1,625		1,750
Note Payable (long-term)		65,000		65,000
Total Liabilities		133,625		99,250
Common Stock (par $10)		105,000		105,000
Retained Earnings		75,500		38,750
Total Liabilities and Stockholders’ Equity	$	314,125	$	243,000

Required:

Compute the earnings per share for the current and previous years. Are the current year results better, or worse, than those for the previous year?
Stockholders’ equity totaled $125,000 at the beginning of the previous year. Compute the return on equity (ROE) ratios for the current and previous years. Are the current year results better, or worse, than those for the previous year?
Net property and equipment totaled $135,000 at the beginning of the previous year. Compute the fixed asset turnover ratios for the current and previous years. Are the current year results better, or worse, than those for the previous year?
Compute the debt-to-assets ratios for the current and previous years. Is debt providing financing for a larger or smaller proportion of the company’s asset growth?
Compute the times interest earned ratios for the current and previous years. Are the current year results better, or worse, than those for the previous year?
After Pinnacle Plus released its current year’s financial statements, the company’s stock was trading at $43. After the release of its previous year’s financial statements, the company’s stock price was $40 per share. Compute the P/E ratios for both years. Does it appear that investors have become more (or less) optimistic about Pinnacle’s future success?

Expert Solution

Earning per share = (Net Income - Preferred Dividends)/Total Outstanding Common Shares
EPS (Current Year) = 45850/10500 = $4.37
EPS (Previous Year) = 29050/10500 = $2.77
Current year's EPS has been much better than the previous year.

Return on Equity = Net Income/Average Shareholder's Equity
Current Year Shareholder's Equity = 105000+75500 = 180500
Previous Year Shareholder's Equity = 105000+38750 = 143750
Shareholder's Equity at the start of previous year = 125000
ROE (Current Year) = 45850/162125 = 0.28 or 28%
ROE (Previous Year) = 29050/134375 = 0.22 or 22%
Current Year's ROE is better than the previous year.

Fixed Assets Turnover Ratio = Net Sales/Average Fixed Assets
Current Year Fixed Assets = 120000
Previous Year Fixed Assets = 130000
Fixed Assets at the start of previous year = 135000
Fixed Assets Turnover Ratio (Current Year) = 235000/125000 = 1.88 times
Fixed Assets Turnover Ratio (Previous Year) = 199000/132500 = 1.50 times
Current Years Fixed Assets Turnover Ratio is better.

Debt to Asset Ratio = Total Debt/Total Assets
Debt to Asset Ratio (Current Year) = (67000+65000)/314125 = 0.42 or 42%
Debt to Asset Ratio (Previous Year) = (32500+65000)/243000 = 0.40 or 40%
Debt is providing less proportion to the growth of the assets.

ekkarill92 answered 6 months ago

Pinnacle Plus declared and paid a cash dividend of $6,600 in the current year. Its comparative...

Pinnacle Plus declared and paid a cash dividend of $6,600 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information: Current Year Previous Year Income Statement Sales Revenue $ 110,000 $ 99,000 Cost of Goods Sold 52,000 48,000 Gross Profit 58,000 51,000 Operating Expenses 36,000 33,000 Interest Expense 4,000 4,000 Income before Income Tax Expense 18,000 14,000 Income Tax Expense (30%) 5,400 4,200 Net Income $ 12,600 $ 9,800 Balance Sheet Cash $...

Pinnacle Plus declared and paid a cash dividend of $7,600 in the current year. Its comparative...

Pinnacle Plus declared and paid a cash dividend of $7,600 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information: Current Year Previous Year Income Statement Sales Revenue $ 160,000 $ 139,000 Cost of Goods Sold 72,000 68,000 Gross Profit 88,000 71,000 Operating Expenses 46,000 41,000 Interest Expense 5,000 5,000 Income before Income Tax Expense 37,000 25,000 Income Tax Expense (30%) 11,100 7,500 Net Income $ 25,900 $ 17,500 Balance Sheet Cash $...

Pinnacle Plus declared and paid a cash dividend of $7,700 in the current year. Its comparative...

Pinnacle Plus declared and paid a cash dividend of $7,700 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information: Current Year Previous Year Income Statement Sales Revenue $ 165,000 $ 143,000 Cost of Goods Sold 74,000 70,000 Gross Profit 91,000 73,000 Operating Expenses 47,000 41,800 Interest Expense 5,100 5,100 Income before Income Tax Expense 38,900 26,100 Income Tax Expense (30%) 11,670 7,830 Net Income $ 27,230 $ 18,270 Balance Sheet Cash $...

Pinnacle Plus declared and paid a cash dividend of $8,400 in the current year. Its comparative...

Pinnacle Plus declared and paid a cash dividend of $8,400 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information: Current Year Previous Year Income Statement Sales Revenue $ 200,000 $ 171,000 Cost of Goods Sold 88,000 84,000 Gross Profit 112,000 87,000 Operating Expenses 54,000 47,400 Interest Expense 5,800 5,800 Income before Income Tax Expense 52,200 33,800 Income Tax Expense (30%) 15,660 10,140 Net Income $ 36,540 $ 23,660 Balance Sheet Cash $...

On May 1, Year 1, Love Corporation declared a $61,500 cash dividend to be paid on...

On May 1, Year 1, Love Corporation declared a $61,500 cash dividend to be paid on May 31 to shareholders of record on May 15. Required a. Record the events occurring on May 1, May 15, and May 31 in a horizontal statements model. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element was not affected by the event. b. Prepare...

PINNACLE PLUS Horizontal Analysis Increase (Decrease) in the Current year (versus Previous year) Current Year Previous...

PINNACLE PLUS Horizontal Analysis Increase (Decrease) in the Current year (versus Previous year) Current Year Previous Year Amount Percentage Income Statement Sales Revenue $120,000 $106,000 % Cost of Goods Sold 54,000 49,000 Gross Profit 66,000 57,000 Operating Expenses 41,000 35,500 Interest Expense 5,000 5,000 Income before Income Tax Expense 20,000 16,500 Income Tax Expense (30%) 6,000 4,950 Net Income $14,000 $11,550 % Balance Sheet Cash $77,900 $43,000 % Accounts Receivable, Net 19,000 10,000 Inventory 26,000 40,000 Property and Equipment, Net...

Golden Corporation declared and paid $3,900 of cash dividends during the current year ended December 31....

Golden Corporation declared and paid $3,900 of cash dividends during the current year ended December 31. Its financial statements also reported the following summarized data: Required: 1. Complete the horizontal analyses for each item in Golden Corporation’s comparative financial statements. TIP: Calculate the increase (decrease) by subtracting the previous year from the current year. Calculate the percentage by dividing the amount of increase (decrease) by the previous year balance. 2-a. Use the horizontal (trend) analyses to identify the accounts where...

Golden Corporation declared and paid $3,700 of cash dividends during the current year ended December 31....

Golden Corporation declared and paid $3,700 of cash dividends during the current year ended December 31. Its financial statements also reported the following summarized data: Current Previous Income Statement Sales revenue $ 215,000 $ 193,000 Cost of goods sold 124,000 114,000 Gross profit 91,000 79,000 Operating expenses 60,300 56,000 Interest expense 3,400 3,300 Income before income taxes 27,300 19,700 Income tax expense 8,190 3,700 Net income $ 19,110 $ 16,000 Balance Sheet Cash $ 5,410 $ 8,700 Accounts receivable (net)...

Condensed financial data of Monopoly Corporation appear below: A cash dividend was declared and paid in...

Condensed financial data of Monopoly Corporation appear below: A cash dividend was declared and paid in full to stockholders during the year. Required: Solve for the missing numbers. Balance Sheet Income Stmt Cash Flow Stmt Solve for the missing numbers. MONOPOLY CORPORATION Comparative Balance Sheet December 31 Current Year Prior Year Assets Cash $34,040 $22,400 Accounts receivable 31,600 Inventories 69,600 Prepaid rent 2,060 1,600 Property, plant, and equipment 218,000 196,000 Accumulated depreciation (52,600) (38,000) Total assets $324,300 $283,200 Liabilities and...

The comparative financial statements prepared at December 31 for Pinnacle Plus showed the following summarized data:...

The comparative financial statements prepared at December 31 for Pinnacle Plus showed the following summarized data: Current Year Previous Year Income Statement Sales Revenue $ 155,000 $ 135,000 Cost of Goods Sold 70,000 66,000 Gross Profit 85,000 69,000 Operating Expenses 45,000 40,200 Interest Expense 4,900 4,900 Income before Income Tax Expense 35,100 23,900 Income Tax Expense (30%) 10,530 7,170 Net Income $ 24,570 $ 16,730 Balance Sheet Cash $ 81,245 $ 29,000 Accounts Receivable, Net 26,000 21,000 Inventory 34,000 47,000...

Question