In: Accounting
Financial statements for Baird Company follow.
BAIRD COMPANY | |||||||
Balance Sheets As of December 31 |
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2019 | 2018 | ||||||
Assets | |||||||
Current assets | |||||||
Cash | $ | 17,000 | $ | 13,000 | |||
Marketable securities | 20,200 | 6,200 | |||||
Accounts receivable (net) | 43,000 | 35,000 | |||||
Inventories | 128,000 | 136,000 | |||||
Prepaid items | 27,000 | 12,000 | |||||
Total current assets | 235,200 | 202,200 | |||||
Investments | 32,000 | 25,000 | |||||
Plant (net) | 265,000 | 250,000 | |||||
Land | 28,000 | 23,000 | |||||
Total assets | $ | 560,200 | $ | 500,200 | |||
Liabilities and Stockholders’ Equity | |||||||
Liabilities | |||||||
Current liabilities | |||||||
Notes payable | $ | 18,800 | $ | 12,500 | |||
Accounts payable | 113,800 | 100,000 | |||||
Salaries payable | 23,000 | 17,000 | |||||
Total current liabilities | 155,600 | 129,500 | |||||
Noncurrent liabilities | |||||||
Bonds payable | 120,000 | 120,000 | |||||
Other | 26,000 | 21,000 | |||||
Total noncurrent liabilities | 146,000 | 141,000 | |||||
Total liabilities | 301,600 | 270,500 | |||||
Stockholders’ equity | |||||||
Preferred stock, (par value $10, 4% cumulative, non-participating; 7,000 shares authorized and issued) | 70,000 | 70,000 | |||||
Common stock (no par; 50,000 shares authorized; 10,000 shares issued) | 70,000 | 70,000 | |||||
Retained earnings | 118,600 | 89,700 | |||||
Total stockholders’ equity | 258,600 | 229,700 | |||||
Total liabilities and stockholders’ equity | $ | 560,200 | $ | 500,200 | |||
BAIRD COMPANY | |||||||
Statements of Income and Retained Earnings For the Years Ended December 31 |
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2019 | 2018 | ||||||
Revenues | |||||||
Sales (net) | $ | 250,000 | $ | 230,000 | |||
Other revenues | 8,400 | 5,400 | |||||
Total revenues | 258,400 | 235,400 | |||||
Expenses | |||||||
Cost of goods sold | 125,000 | 109,000 | |||||
Selling, general, and administrative | 57,000 | 52,000 | |||||
Interest expense | 8,600 | 7,800 | |||||
Income tax expense | 33,000 | 32,000 | |||||
Total expenses | 223,600 | 200,800 | |||||
Net earnings (net income) | 34,800 | 34,600 | |||||
Retained earnings, January 1 | 89,700 | 61,000 | |||||
Less: Preferred stock dividends | 2,800 | 2,800 | |||||
Common stock dividends | 3,100 | 3,100 | |||||
Retained earnings, December 31 | $ | 118,600 | $ | 89,700 | |||
Required
Calculate the following ratios for 2019 and 2018. Since 2017 numbers are not presented, do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018 balance sheet.
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a. Working capital = Current Assets - Current Liabilities
2019 = 235,200 - 155,600 = 79600
2018 = 202,200 - 129,500 = 72700
b. Current ratio = Current Assets / Current Liabilities
2019 = 235,200 / 155,600 = 1.51
2018 = 202,200 / 129,500 = 1.56
c. Quick ratio = Quick Assets / Current Liabilities
2019 = (17000 + 20200 + 43000 ) / 155,600 = 0.52
2018 = (13000 + 6200 + 35000 ) / 129,500 = 0.42
d. Receivables turnover = Sales / Avg. Receivables
2019 = 250000 / (43000 + 35000) / 2 = 250000 / 39000 = 6.41
2018 = 230000 / ( 35000 + 36000 ) / 2 = 230000 / 35500 = 6.48
e, Average days to collect accounts receivable = 365 / Receivables turnover
2019 = 365 / 6.41 = 56.94 Days
2018 = 365 / 6.48 = 56.33 Days
f. Inventory turnover = Cost of Goods sold / Avg. Inventory
2019 = 125000 / (128000 + 136000) / 2 = 125000 / 132000 = 0.95
2018 = 109000 / ( 136000 + 142000 ) / 2 = 109000 / 139000 = 0.784
g. Average days to sell inventory = 365/ Inventory turnover
2019 = 365/ 0.95 = 384 Days
2018 = 365/ 0.784 = 465 Days
h. Debt to assets ratio = Total Liabilities / Total Assets
2019 = 301600 / 560200 = 0.54
2018 = 270500 / 500200 = 0.54
i. Debt to equity ratio = Total Liabilities / Total Equity
2019 = 301600 / 258600 = 1.17
2018 = 270500 / 229700 = 1.18
j. Number of times interest earned = EBIT / Interest Expense
2019 = ( 258400 - 125000 - 57000 ) / 8600 = 76400 / 8600 = 8.88
2018 = ( 235400 - 109000 - 52000 ) / 7800 = 74400 / 7800 = 9.54
k. Plant assets to long-term debt =
2019 = 265000 / 146000 = 1.82
2018 = 250000 / 141000 = 1.77
l. Net margin = Net Income / Sales
2019 = 34800 / 250000 = 13.92%
2018 = 34600 / 230000 = 15.04%
m. Asset turnover = Sales / Avg. Total Assets
2019 = 250000 / 560200 = 0.45
2018 = 230000 / 500200 = 0.46
n. Return on investment = Net Income / (Long Term Liabilities + Stockholders Equity
2019 = 34800 / ( 146000 + 258600 ) = 34800 / 404600 = 8.6%
2018 = 34600 / ( 141000 + 229700 ) = 34600 / 370700 = 9.33%
o. Return on equity = Net Income / Total Equity
2019 = 34800 / 258600 = 13.46%
2018 = 34600 / 229700 = 15.06%
p. Earnings per share = Net income - preferred dividends / Outstanding shares
2019 = ( 34800 - 2800 ) / 10000 = $3.2
2018 = ( 34600 - 2800 ) / 10000 = $3.18
q. Book value per share = Common Stockholders Equity / Outstanding shares
2019 = (70000 + 118600 ) / 10000 = $18.86
2018 = ( 70000 + 89700 ) / 10000 = $15.97
r. Price-earnings ratio = Market Price per share / EPS
2019 = 12.70 / 3.2 = 3.97
2018 = 11.85 / 3.18 = 3.73
s. Dividend yield = Dividend per share / Market Price per share
2019 = (3100 / 10000 ) / 12.70 = 2.44%
2018 = (3100 / 10000 ) / 11.85 = 2.62%