Question

Condensed balance sheet and income statement data for Riverbed Corporation are presented here.

RIVERBED CORPORATION Balance Sheets December 31
		2022		2021		2020
Cash		$ 33,000		$ 23,000		$ 21,000
Accounts receivable (net)		53,000		48,000		51,000
Other current assets		95,000		100,000		69,000
Investments		60,000		75,000		50,000
Plant and equipment (net)		500,000		370,000		358,000
		$741,000		$616,000		$549,000
Current liabilities		$ 88,000		$ 83,000		$ 73,000
Long-term debt		150,000		90,000		55,000
Common stock, $10 par		325,000		315,000		305,000
Retained earnings		178,000		128,000		116,000
		$741,000		$616,000		$549,000

RIVERBED CORPORATION Income Statements For the Years Ended December 31
		2022		2021
Sales revenue		$745,000		$605,000
Less: Sales returns and allowances		43,000		33,000
Net sales		702,000		572,000
Cost of goods sold		430,000		355,000
Gross profit		272,000		217,000
Operating expenses (including income taxes)		183,000		153,000
Net income		$ 89,000		$ 64,000

Additional information:

1.		The market price of Riverbed’s common stock was $7.00, $7.50, and $8.50 for 2020, 2021, and 2022, respectively.
2.		You must compute dividends paid. All dividends were paid in cash.

Compute the following ratios for 2021 and 2022.

		2022			2021
Profit margin		enter percentages	%		enter percentages	%		(Round answers to 1 decimal place, e.g. 1.5%.)
Gross profit rate		enter percentages	%		enter percentages	%		(Round answers to 1 decimal place, e.g. 1.5%.)
Asset turnover		enter asset turnover in times	times		enter asset turnover in times	times		(Round answers to 2 decimal places, e.g. 1.83.)
Earnings per share		$enter earnings per share in dollars			$enter earnings per share in dollars			(Round answers to 2 decimal places, e.g. 1.83.)
Price-earnings ratio		enter price-earnings ratio in times	times		enter price-earnings ratio in times	times		(Round answers to 1 decimal place, e.g. 1.5.)
Payout ratio		enter percentages	%		enter percentages	%		(Round answers to 0 decimal places, e.g. 15%.)
Debt to assets ratio		enter percentages	%		enter percentages	%		(Round answers to 0 decimal places, e.g. 15%.)

Answer 1

	2022		2021
Profit margin ($89,000/$702,000*100); ($64,000/$572,000*100)	12.7	%	11.2	%
Gross profit rate ($272,000/$702,000*100); ($217,000/$572,000*100)	38.7	%	37.9	%
Asset turnover ($702,000/[$741,000+$616,000/2]); ($572,000/[$616,000+$549,000/2])	1.03	times	0.98	times
Earnings per share ($89,000/32,500 shares); ($64,000/31,500)	$2.74	times	$2.03	times
Price earnings ratio ($8.50 / $2.74); ($7.50 / $2.03)	3.1	times	3.7	times
Payout ratio ($1 / $2.74 * 100); ($2 / $2.03 * 100)	36	%	99	%
Debt to assets ratio ($88,000 + $150,000 = $238,000/$741,000*100); ($83,000+$90,000=$173,000/$616,000*100)	32	%	28	%

Working notes:
Retained earnings in 2020	$116,000
Add: Net Income in 2021	$64,000
Less: Retained earnings in 2021	($128,000)
Dividends in 2021 (a)	$52,000
Number of shares in 2021 (b)	$31,500
Dividend per share in 2021 (a/b)	$2
Retained earnings in 2021	$128,000
Add: Net Income in 2022	$89,000
Less: Retained earnings in 2022	($178,000)
Dividends in 2022	$39,000
Number of shares in 2022 (b)	$32,500
Dividend per share in 2022 (a/b)	$1