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Edison, Stagg, and Thornton, finacial leverage,Mary Lynn Corporation, Lone Pine Company

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Question;Liquidity ratios.Edison, Stagg, and Thornton;have the following financial information at the close of business on July 10;Edison;Stagg;Thornton;Cash;\$6,000;\$5,000;\$4,000;Short-term investments;3,000;2,500;2,000;Accounts receivable;2,000;2,500;3,000;Inventory;1,000;2,500;4,000;Prepaid expenses;800;800;800;Accounts payable;200;200;200;Notes payable: short-term;3,100;3,100;3,100;Accrued payables;300;300;300;Long-term liabilities;3,800;3,800;3,800;1.;Compute the current and quick ratios for each of the three companies. (Round;calculations to two decimal places.) Which firm is the most liquid? Why?;2. Computation;and evaluation of activity ratios.The following data relate to Alaska Products, Inc;20X5;20X4;Net credit sales;\$832,000;\$760,000;Cost of goods sold;530,000;400,000;Cash, Dec. 31;125,000;110,000;Average Accounts receivable;205,000;156,000;Average Inventory;70,000;50,000;Accounts payable, Dec. 31;115,000;108,000;Instructions;a. Compute the accounts receivable and inventory turnover ratios;for 20X5. Alaska rounds all calculations to two decimal places.;3. Profitability;ratios, trading;on the;equity. Digital Relay has both preferred and common;stock outstanding. The com?pany reported the following information for;20X7;Net sales;\$1,750,000;Interest expense;120,000;Income tax expense;80,000;Preferred dividends;25,000;Net income;130,000;Average assets;1,200,000;Average common stockholders;equity;500,000;1.;Compute the profit margin on sales ratio, the return on equity and the return;on assets, rounding calculations to two decimal places.;2. Does the firm;have positive or negative financial;leverage?;Briefly ex?plain.;4. Horizontal;analysis. Mary Lynn Corporation has been operating;for several years. Selected data from the 20X1 and 20X2 financial statements;follow.;20X2;20X1;Current Assets;\$86,000;\$80,000;Property, Plant, and Equipment;(net);99,000;90,000;Intangibles;25,000;50,000;Current Liabilities;40,800;48,000;Long-Term Liabilities;153,000;160,000;Stockholders? Equity;16,200;12,000;Net Sales;500,000;500,000;Cost of Goods Sold;322,500;350,000;Operating Expenses;93,500;85,000;a. Prepare a horizontal analysis for 20X1 and 20X2. Briefly;comment on the results of your work.;5.Vertical;analysis. Mary Lynn Corporation has been operating for several years.;Selected data from the 20X1 and 20X2 financial;statements;follow.;20X2;20X1;Current Assets;\$86,000;\$80,000;Property, Plant, and Equipment;(net);99,000;80,000;Intangibles;25,000;50,000;Current Liabilities;40,800;48,000;Long-Term Liabilities;153,000;150,000;Stockholders? Equity;16,200;12,000;Net Sales;500,000;500,000;Cost of Goods Sold;322,500;350,000;Operating Expenses;93,500;85,000;a. Prepare a vertical analysis for 20X1 and 20X2. Briefly;comment on the results of your work.;6. Ratio;computation. The financial;statements of;the Lone Pine Company follow.;LONE PINE COMPANY;Comparative Balance Sheets;December 31, 20X2 and 20X1 (\$000 Omitted);20X2;20X1;Assets;Current Assets;Cash and Short-Term Investments;\$400;\$600;Accounts Receivable (net);3,000;2,400;Inventories;3,000;2,300;Total Current Assets;\$6,400;\$5,300;Property, Plant, and Equipment;Land;\$1,700;\$500;Buildings and Equipment (net);1,500;1,000;Total Property, Plant, and Equipment;\$3,200;\$1,500;Total Assets;\$9,600;\$6,800;Liabilities and Stockholders? Equity;Current Liabilities;Accounts Payable;\$2,800;\$1,700;Notes Payable;1,100;1,900;Total Current Liabilities;\$3,900;\$3,600;Long-Term Liabilities;Bonds Payable;4,100;2,100;Total Liabilities;\$8,000;\$5,700;Stockholders? Equity;Common Stock;\$200;\$200;Retained Earnings;1,400;900;Total Stockholders? Equity;\$1,600;\$1,100;Total;Liabilities and Stockholders? Equity;\$9,600;\$6,800;LONE PINE COMPANY;Statement of Income and Retained Earnings;For the Year Ending December 31,20X2 (\$000 Omitted);Net Sales*;\$36,000;Less: Cost of Goods Sold;\$20,000;Selling Expense;6,000;Administrative Expense;4,000;Interest Expense;400;Income Tax Expense;2,000;32,400;Net Income;\$3,600;Retained Earnings, Jan. 1;900;Ending Retained Earnings;\$4,500;Cash Dividends Declared and Paid;3,100;Retained Earnings, Dec. 31;\$1,400;*All sales are on account.;Instructions;Compute;the following items for Lone Pine Company for 20X2, rounding;all calcu?lations to two decimal places when;necessary;a. Quick;ratio;b. Current ratio;c. Inventory-turnover ratio;d.;Accounts-receivable-turnover ratio;e. Return-on-assets ratio;f. Net-profit-margin ratio;g.;Return-on-common-stockholders? equity;h. Debt-to-total assets;i. Number of times that;interest is earned

Paper#37488 | Written in 18-Jul-2015

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