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chapter_17_assignment.docxAssignment 1.
The McConnell Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and balance sheet, as well as the industry average data for retailers.
MCCONNEL DEPARTMENT STORES, INC.
Income Statement Compared with Industry Average
Year Ended December 31, 2014
McConnell Industry Average
Net Sales $777,000 100.0%
Cost of Goods Sold _522,816___ 65.8 _
Gross Profit 255,184 34.2
Operating Expenses _161,046 19.7 _
Operating Income 94,138 14.5
Other Expenses _____4,668 0.4 _
Net Income $ 89,470 14.1 %
MCCONNELL DEPARTMENT STORES, INC.
Balance Sheet Compared with Industry Average
December 31, 20144
McConnell Industry Average
Current Assets $ 325,440 70.9%
Fixed Assets, Net 120,960 23.6
Intangible Assets, Net 8,640 0.8
Other Assets _ 24,960 4.7 _ Total Assets _$ 480,000 _ 14.1% _
Current Liabilities $ 222,720 48.1%
Long-term Liabilities _ 107,520 16.6 _
Total Liabilities 330,240 64.7
Stockholders’ Equity _ 149,760 35.3 _
Total Liabilities and
Stockholders’ Equity $ 480,000 100.0%
Assignment : Prepare a vertical analysis for McConnell for both its income statement and balance sheet.
Assignment 2. Comparative financial statement data of Danfield, Inc. follow:
DANFIELD, INC.
Comparative Income Statement
Years Ended December 31, 2015 and 2014
2015 2014 _
Net Sales $ 467,000 $ 428,000
Cost of Goods Sold 237,000 218,000
Gross Profit 230,000 210,000
Operating Expenses 136,000 134,000
Income From Operations 94,000 76,000
Interest Expense 9,000 10,000
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
December 31, 2015 and 2014
2015 2014 2013*
ASSETS
Current Assets:
Cash $ 97,000 $ 95,000
Accounts Receivable 112,000 118,000 $ 102,000
Merchandise Inventory 145,000 163,000 203,000
Prepaid Expenses 12,000 5,000
Total Current Assets $ 577,000 $ 560,000 598,000
Liabilities
Total Current Liabilities $ 225,000 $ 246,000
Long-term Liabilities 114,000 97,000
Total Liabilities 339,000 343,000
Stockholders’ Equity
Preferred Stock, 3% 108,000 108,000
Common Stockholders’ Equity, no par 130,000 109,000 85,000
Total Liabilities and
Stockholders’ Equity $ 577,000 $ 560,000
1. Market price of Danfield’s common stock: $86.58 at December 31, 2015, and $46.54 at December 31, 2014.
2. Common shares outstanding: 12,000 during 2015 and 10,000 during 2014 and 2013.
3. All sales are on credit.
Assignment:
A Compute the following ratios for 2015 and 2014:
1. Current Ratio 6. Debt to equity ratio
2. Cash Ratio 7. Rate of return common stockholders’ equity
3. Times-interest-earned ratio 8. Earnings per share of common stock
4. Inventory turnover 9. Price/earnings ratio
5. Gross Profit percentage
B. Decide (a) whether Danfield’s ability to pay debts and to sell inventory improved or deteriorated during 2015 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.
