project 1

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Using the following data (income statements and balance sheets)compute the following ratios for 2027, as well as both horizontal and vertical analysis AND comment on the meaning and importance of these ratios.

Additional data: All sales are on credit; Net cash provided by operations in 2027 was $220,000; capital expenditures $136,000 ; cash dividends paid $70,000.

A. Earnings per share (EPS)

Gross Profit Percentage

B. Return on stockholders' equity (ROE)

C. Return on assets (ROA)

D. Current Ratio (CR)

E. Accounts Receivable Turnover

F. Average Collection Period

G. Inventory Turnover

H. Days in Inventory

Solution

I. Times Interest Earned

J. Asset Turnover

K. Debt to Assets Ratio

L. Free Cash Flow

Jefferson Company
Income Statements
for the years ended December 31
	2027	2026
Net Sales	$ 1,890,540	$ 1,750,500
Cost of Goods Sol.d	1,058,540	1,006,000
Gross Profit	832,000	744,500
Selling & Adm Expenses	500,000	479,000
Income from Operations	332,000	265,500
Interest Expenses	22,000	20,000
Income Before Income Tax	310,000	245,500
Income Tax Expense	92,000	73,000
Net Income	$ 218,000	$ 172,500

Jefferson Company
Balance Sheets
December 31
	2027	2026
Assets
Current Assets:
Cash	60,100	64,200
S/T Investments	74,000	50,000
Accounts Receivable (net)	117,800	102,800
Inventory	126,000	115,500
Total Current Assets	377,900	332,500
Plant Assets (net)*	649,000	520,300
Total Assets	$ 1,026,900	$ 852,800

Liabilities & Equity
Current Liabilities
Accounts Payable	$ 160,000	$ 145,400
Income Taxes Payable	43,500	42,000
Total Current Liabilities	203,500	187,400
Bonds Payable	220,000	200,000
Total Liabilities	$ 423,500	$ 387,400
Stockholders' Equity
Common Stock ($5 par)	290,000	300,000
Retained Earnings	313,400	165,400
Total Stockholder Equity	603,400	465,400
Total Liabilities and Equity	$ 1,026,900	$ 852,800