Question

P14-3 Perform ratio analysis and evaluate financial position and operating results
Condensed balance sheet and income statement data for Landwehr Corporation appear
below and on page 753.
	LANDWEHR CORPORATION
	Balance Sheets
	December 31
				2016	2015	2014
	Cash			25,000	20,000	18,000
	Accounts receivable (net)			50,000	45,000	48,000
	Other current assets			90,000	95,000	64,000
	Investments			75,000	70,000	45,000
	Plant and equipment (net)			400,000	370,000	358,000
				640,000	600,000	533,000
	Current liabilities			75,000	80,000	70,000
	Long-term debt			80,000	85,000	50,000
	Common stock, $10 par			340,000	310,000	300,000
	Retained earnings			145,000	125,000	113,000
				640,000	600,000	533,000
	LANDWEHR CORPORATION
	Income Statement
	For the Years Ended December 31
					2016	2015
	Sales revenue				$740,000	$700,000
	Less: Sales returns and allowances				40000	50000
	Net sales				700000	650000
	Cost of goods sold				420000	400000
	Gross profit				280000	250000
	Operating expenses (including income taxes)				235000	220000
	Net income				$45,000	$30,000
	Additional information:
	1. The market price of Landwehr's common stock was $4.00, $5.00, and $8.00 for
	2014, 2015 and 2016, respectively.
	2. All dividends are paid in cash.
Instructions
(a)	Compute the following ratios for 2015 and 2016.
	(1) Profit margin.
	(2) Asset turnover.
	(3) Earnings per share (Weighted-average common shares in 2016 were 32,000 and
	in 2015 were 31,000.)
	(4) Price-earnings ratio.
	(5) Payout ratio.
	(6) Debt to assets ratio.
(b)	Based on the ratios calculated, discuss briefly the improvement or lack thereof in
	financial position and operating results from 2015 to 2016 of Landwehr Corporation.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .
		2015				2016
	(1)	Profit margin:
		Net income		Value		Net income		Value
		Net sales		Value		Net sales		Value
			Ratio	?			Ratio	?
	(2)	Asset turnover:
		Net sales		Value		Net sales		Value
		Average total assets		Value		Average total assets		Value
			Ratio	?			Ratio	?
	(3)	Earnings per share:
		Net income - Pfd. Dividends		Value		Net income - Pfd. Dividends		Value
		Weighted average common shares outstanding		Value		Weighted average common shares outstanding		Value
			EPS	?			EPS	?
	(4)	Price-earnings ratio:
		Market price per share		Value		Market price per share		Value
		Earnings per share		Value		Earnings per share		Value
			Ratio	?			Ratio	?
	(5)	Payout ratio:
		Cash dividends declared on common		Value		Cash dividends declared on common		Value
		Net income		Value		Net income		Value
			Ratio	?			Ratio	?
	(6)	Debt to assets ratio:
		Total liabilities		Value		Total liabilities		Value
		Total assets		Value		Total assets		Value
			Ratio	?			Ratio	?

Answer 1

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