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| Comparative financial statement data of | Danfield, Inc. | ||||
| Comparative Income Statement | |||||
| Years Ended December 31, | 2012 | 2011 | |||
| Net sales | 467,000 | 428,000 | |||
| Cost of goods sold | 237,000 | 218,000 | |||
| Gross profit | 230,000 | 2 | 10,000 | ||
| Operating expenses | 136,000 | 134,000 | |||
| Income from operations | 94,000 | 76,000 | |||
| Interest expense | 9,000 | ||||
| Income before income tax | 85,000 | 66,000 | |||
| Income tax expense | 24,000 | 27,000 | |||
| Net income | 61,000 | 39,000 | |||
| Danfield, Inc. | |||||
| Comparative Balance Sheet | |||||
| Years Ended December 31, 2012 and 2011 | |||||
| 2010* | |||||
| Current assets: | |||||
| Cash | 97,000 | 95,000 | |||
| Current receivables, net | 112,000 | 118,000 | 102,000 | ||
| Inventories | 145,000 | 163,000 | 203,000 | ||
| Prepaid expenses | 12,000 | 5,000 | |||
| Total current assets | 366,000 | 381,000 | |||
| Property, plant, and equipment, net | 211,000 | 179,000 | |||
| Total assets | 577,000 | 560,000 | 598,000 | ||
| Total current liabilities | 225,000 | 246,000 | |||
| Long-term liabilities | 114,000 | ||||
| Total liabilities | 339,000 | 343,000 | |||
| Preferred stock, 3% | 108,000 | ||||
| Common stockholders’ equity, no par | 130,000 | 109,000 | |||
| Total liabilities and stockholders’ equity | |||||
| * Selected 2010 amounts | |||||
| 1. Market price of Danfield’s common stock: $86.58 at December 31, 2012 and $46.54 at December 31, 2011. | |||||
| 2. Common shares outstanding: 12,000 during 2012 and 10,000 during 2011 and 2010. | |||||
| 3. All sales on credit. | |||||
| Requirements | |||||
| 1. Compute the following ratios for 2012 and 2011: | |||||
| a. Current ratio | |||||
| b. Times-interest-earned ratio | |||||
| c. Inventory turnover | |||||
| d. Gross profit percentage | |||||
| e. Debt to equity ratio | |||||
| f. Rate of return on common stockholders’ equity | |||||
| g. Earnings per share of common stock | |||||
| h. Price/earnings ratio |
2. Decide (a) whether Danfield’s ability to pay debts and to sell inventory improved or deteriorated during 2012 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.
