Question

Pippin Piping Co. For the Years Eaded December 31 2016 2015 2014 Sales revenue Cost of goods sold Gross margin $576,600 $523,000 $484,200 291,000 259,200 234,300 285,600 263,800 249,900 106,200 104,600 104,100 179,400 159,200 145,800 15,900 23,900 11,200 10,500 11,900 Income before income tax 190,700 164,600 157.800 Income tax expense (4096) 76,280 65,840 63,120 $114,420 $98,760 $94,680 Operating income Other revenue Interest expense Net income Pippin Piping Co. Comparative Balance Sheets As of December 31 2014 $32,000 $25,800 $20,500 126,860 127,000 94,300 60,000 80,700 6,000 4,600 229,860 243,500 175,400 668,900 576,000 540,300 $898,760 $819,S00 715,700 Assets 2016 2015 Cash Accounts receivable (net) Inventory Prepaid expenses 1,000 10,000 Total current assets Property& equipment (net) Total Assets Liabilities and Stockholders' Equity Accounts payable Accrued expenses 53,120 $81,200 79,100 41,700 64,120 93,440 120,800 170,000 160,000 150,000 234,120 253440 270,800 11,000 12,240 Total current liabilities Long-term debt Total liabaties Stockholders Equity Common stock, $0.50 par value Additional paid-in capital Retained earnings ,000 6,000 000 9,000 99,000 62,000 S59,640 461,060 377.900 664,640 566,060 444,900 Total stockholders' equity Total Uabilities and Stockholders' Equity $898,760 $819,s00 $715,700 Additional information 2016 2015 2014 $38 %35 $30 12,000 12,000 10,000 Dividends paid per share 13 1.301.25 Closing stock price Shares outstanding

Answer 1

Calculate time-interest earned ratio as follows: А 1 2 Interest expense 3 Add: Income before income tax 4 Income before interest and taxes 5 Times interest earned ratio B | 2014 | $11,900 $157,800 $169,700 14.3 C 2015 $10,500 $164,600 $175,100 16.7 D 2016 $11,200 $190,700 $201.900 18.0 1 Therefore, times interest earned ratio for 2014, 2015 and 2016 is 14.3, 16.7 and 18 respectively. Calculations are shown below: A B C D 1 2014 2015 2016 2 Interest expense 11900 10500 11200 3 Add: Income before income tax (157800 164600 (190700 4 Income before interest and taxes =B2+B3 (=C2+C3 =D2+D3 5 Times interest earned ratio =B4/B2 =C4/C2 =D4/D2 Calculate gross profit percentage as follows: A B co 2014 2015 2016 2 Gross margin $249,900 $263.800 $285,600 3 Sales revenue $484.200 $523,000 $576,600 4 Gross margin % 51.6% 50.4% 49.5% Therefore, gross profit percentage for 2014, 2015 and 2016 is 51.6%, 50.4% and 49.5% respectively. Calculations are shown below: C D 2014 2015 2016 | 2 Gross margin 249900 263800 285600 3 Sales revenue 484200 523000 576600 4 Gross margin % =B2/B3 =C2/C3 =D2/D3

Calculate return on assets ratio as follows: 1 Return on Assets Ratio:- 2 Net income 3 Interest Expense (1-tax rate) 4 Net income+Interest Expense (1-tax rate) Average Total assets 5 Copening total assets + closing total assets)+2 6 Return on Assets Ratio B 2015 $98.760 $6.300 $105,060 2016 $114.420 $6.720 $121.140 $767.600 13.7% $859,130 14.1% Therefore, return on assets ratio for 2015 and 2016 is 13.7% and 14.1% respectively. Calculations are shown below: с 1 Return on Assets Ratio:- 2 Net income 3 Interest Expense (1-tax rate) 4 Net income+Interest Expense (1-tax rate) Average Total assets 5 Copening total assets + closing total assets)+2 6 Return on Assets Ratio B 2015 98760 =10500* (1-0.4) I=B2+B3 2016 114420 =11200* (1-0.4) =C2+C3 =(715700 + 819500/2 =(819500+898760/2 =B4/B5 =C4/C5 Calculate return on common stockholder's equity as follows: LA 2 Net income 3 Beginning balance of common stockholders equity | 4 Ending balance of common stockholders equity 5 Average Common stockholders' equity 6 Return on common stock holders equity B 2015 $98.760 $444,900 $566,060 $505.480 19.5% C 2016 $114.420 $566,060 $664.640 $615.350 18.6% / Therefore, return on common stockholder's equity for 2015 and 2016 is 19.5% and 18.6% respectively. Calculations are shown below:

B C 2015 2016 2 Net income 98760 1 14420 3 Beginning balance of common stockholders equity |444900 566060 4 Ending balance of common stockholders equity 566060 664640 5 Average Common stockholders' equity =B3+B4)/2 =C3+C4)/2 6 Return on common stock holders equity =B2/B5 =C2/C5