Question

The comparative financial statements prepared at December 31 for Pinnacle Plus showed the following summarized data: Current Year Previous Year Income Statement Sales Revenue $ 190,000 $ 163,000 Cost of Goods Sold 84,000 80,000 Gross Profit 106,000 83,000 Operating Expenses 52,000 45,800 Interest Expense 5,600 5,600 Income before Income Tax Expense 48,400 31,600 Income Tax Expense (30%) 14,520 9,480 Net Income $ 33,880 $ 22,120 Balance Sheet Cash $ 90,380 $ 22,000 Accounts Receivable, Net 33,000 28,000 Inventory 41,000 54,000 Property and Equipment, Net 111,000 121,000 Total Assets $ 275,380 $ 225,000 Accounts Payable $ 58,000 $ 33,400 Income Tax Payable 1,400 1,300 Note Payable (long-term) 56,000 56,000 Total Liabilities 115,400 90,700 Common Stock (par $10) 99,600 99,600 Retained Earnings† 60,380 34,700 Total Liabilities and Stockholders’ Equity $ 275,380 $ 225,000 † During the current year, cash dividends amounting to $8,200 were declared and paid. Required: 1-a. Compute the gross profit percentage in the current and previous years. (Round your answers to 1 decimal place.) 1-b. Are the current year results better, or worse, than those for the previous year? Better Worse 2-a. Compute the net profit margin for the current and previous years. (Round your answers to 1 decimal place.) 2-b. Are the current year results better, or worse, than those for the previous year? Better Worse 3-a. Compute the earnings per share for the current and previous years. (Round your answers to 2 decimal places.) 3-b. Are the current year results better, or worse, than those for the previous year? Better Worse 4-a. Stockholders' equity totaled $116,000 at the beginning of the previous year. Compute the return on equity (ROE) ratios for the current and previous years. (Round your answers to 1 decimal place.) 4-b. Are the current year results better, or worse, than those for the previous year? Better Worse 5-a. Net property and equipment totaled $126,000 at the beginning of the previous year. Compute the fixed asset turnover ratios for the current and previous years. (Round your answers to 2 decimal places.) 5-b. Are the current year results better, or worse, than those for the previous year? Better Worse 6-a. Compute the debt-to-assets ratios for the current and previous years. (Round your answers to 2 decimal places.) 6-b. Is debt providing financing for a larger or smaller proportion of the company's asset growth? Larger Proportion Smaller Proportion 7-a. Compute the times interest earned ratios for the current and previous years. (Round your answers to 1 decimal place.) 7-b. Are the current year results better, or worse, than those for the previous year? Better Worse 8-a. After Pinnacle Plus released its current year's financial statements, the company's stock was trading at $34. After the release of its previous year's financial statements, the company's stock price was $31 per share. Compute the P/E ratios for both years. (Round your intermediate calculations to 2 decimal places and final answers to 1 decimal place.) 8-b. Does it appear that investors have become more (or less) optimistic about Pinnacle's future success? More Optimistic Less Optimistic

Answer 1