Question

The comparative financial statements prepared at December 31. 2014, for Pinnacle Plus showed the following summarized data: 2014I11 2013 Income Statement Sales Revenue* Cost of Goods Sold $125,000 $114,000 58,000 54,000 Gross Proft Operating Expenses Interest Expense 67,000 40,500 3,500 60,000 3,500 Income before Income Tax Expense Income Tax Expense (30%) 23,000 6,900 19,000 5,700 Net Income s16,10013,300 Balance Sheet Cash Accounts Receivable, Net Inventory Property and equipment, Net 47,742 14,350 32,000 32,500 85,000 39,500 33,000 95,000 Total Assets $197.242 $181,850 $ 33,792 28,900 450 Accounts Payable Income Taxes Payable Note Payable, Long-Term 950 35,000 35,000 Total Liabilities Contributed Capital (9,050 shares) Retained Eamingst 69,742 90,500 37,000 64,350 90,500 27,000 Total Liabilities and Shareholders' Equity $197.242 $181,850

Answer 1

	Pinnacle Plus
Requirement 1a)
	Gross profit % for			Gross Profit/Turnover%
	2014	=	53.60	%
	2013	=	52.63	%
Requirement 1b)
	Yes	The trend is going in the right direction
Requirement 2a)
	Net profit margin for			Net Income/Turnover%
	2014	=	12.88	%
	2013	=	11.67	%
Requirement 2b)
	Yes	The trend is going in the right direction
Requirement 3a)
	Earning per share for			Net Income/No. of shares outstanding
	2014	=	1.779006
	2013	=	1.469613
Requirement 3b)
	Trend does look		Good
Requirement 4a)
	Return on equity ratio for			Net Income/Average shareholder's equity
	2014		6.57	%
	2013		6.11	%
		Shareholder's equity for the year
			2014	127500
			2013	117500
			2012	100000
Requirement 4b)
	Yes	The trend is going into right direction.
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