Question

The following financial statements apply to Gibson Company:

	2019				2018
Revenues
Net sales	$	211,700			$	176,800
Other revenues		9,200				6,500
Total revenues		220,900				183,300
Expenses
Cost of goods sold		126,000				102,300
Selling expenses		19,900				17,900
General and administrative expenses		9,700				8,700
Interest expense		1,400				1,400
Income tax expense		19,300				16,100
Total expenses		176,300				146,400
Net income	$	44,600			$	36,900
Assets
Current assets
Cash	$	4,700			$	7,100
Marketable securities		3,000				3,000
Accounts receivable		36,000				30,800
Inventories		101,500				95,900
Prepaid expenses		3,100				2,100
Total current assets		148,300				138,900
Plant and equipment (net)		105,100				105,100
Intangibles		20,100				0
Total assets	$	273,500			$	244,000
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities
Accounts payable	$	39,400			$	55,100
Other		16,600				16,400
Total current liabilities		56,000				71,500
Bonds payable		65,900				66,900
Total liabilities		121,900				138,400
Stockholders’ equity
Common stock (44,000 shares)		113,900				113,900
Retained earnings		37,700				(8,300	)
Total stockholders’ equity		151,600				105,600
Total liabilities and stockholders’ equity	$	273,500			$	244,000

Required

Calculate the following ratios for 2018 and 2019. Since 2017 numbers are not presented do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018 balance sheet.

1. Net margin. (Round your answers to 2 decimal places.)
2. Return on investment. (Round your answers to 2 decimal places.)
3. Return on equity. (Round your answers to 2 decimal places.)
4. Earnings per share. (Round your answers to 2 decimal places.)
5. Price-earnings ratio (market prices at the end of 2018 and 2019 were $6.14 and $4.85, respectively). (Round your intermediate calculations and final answers to 2 decimal places.)
6. Book value per share of common stock. (Round your answers to 2 decimal places.)
7. Times interest earned. Exclude extraordinary income in the calculation as they cannot be expected to recur and, therefore, will not be available to satisfy future interest payments. (Round your answers to 2 decimal places.)
8. Working capital.
9. Current ratio. (Round your answers to 2 decimal places.)
10. Quick (acid-test) ratio. (Round your answers to 2 decimal places.)
11. Accounts receivable turnover. (Round your answers to 2 decimal places.)
12. Inventory turnover. (Round your answers to 2 decimal places.)
13. Debt to equity ratio. (Round your answers to 2 decimal places.)
14. Debt to assets ratio. (Round your answers to the nearest whole percent.)

Answer 1

	2019	2018
Net Margin Ratio
Net Income (A)	44600.00	36900.00
Sales (B)	211700.00	176800.00
Profit Margin Ratio (A/B)	21.07%	20.87%
Return On Investment
Net Income (A)	44600.00	36900.00
Total Assets (B)	273500.00	244000.00
Return on Total Assets (A/C)	16.31%	15.12%
Return on Equity
Net Income (A)	44600.00	36900.00
Total Equity (B)	151600.00	105600.00
Average Shareholder's Equity ( C)	128600.00	105600.00
Return on Equity (A/C)	34.68%	34.94%
Earning Per Share (EPS)
Net Income After Tax (A)	44600.00	36900.00
Average No. of Share Outstanding (B)	44000.00	44000.00
Earning Per Share (A/B)	1.01	0.84
Price Earning Ratio (P/E Ratio)
Market Value Per Share (A)	4.85	6.14
Earning Per Share (B)	1.01	0.84
P/E Ratio (A/B)	4.78	7.32
Book Value Per Share
Total Equity (A)	151600.00	105600.00
No. of Share Outstanding (B)	44000.00	44000.00
Book Value Per Share (A/B)	3.45	2.40
Time Interest Earned
Net Income After Tax	44600.00	36900.00
Add : Tax	19300.00	16100.00
Add : Interest	1400.00	1400.00
Income Before Interest and Tax (A)	65300.00	54400.00
Interest Expenses (B)	1400.00	1400.00
Time Earned Equity (A/B)	46.64	38.86
Current Ratio
Current Assets (A)	148300.00	138900.00
Current Liabilities (B)	56000.00	71500.00
Current Ratio (A/B)	2.65	1.94
Acid Test Ratio
Current Assets (A)	148300.00	138900.00
Inventory (B)	101500.00	95900.00
Quick Assets ( C) = (A-B)	46800.00	43000.00
Current Liabilities (D)	56000.00	71500.00
Acid Test Ratio (C/D)	0.84	0.60
Debtor's Turnover Ratio
Sales (A)	211700.00	176800.00
Accounts Receivable (B)	36000.00	30800.00
Average Debtors ( C)	33400.00	30800.00
Debtor's Turnover Ratio (A/C)	6.34	5.74
Inventory Turnover Ratio
Cost of Goods Sold (A)	126000.00	102300.00
Inventory (B)	101500.00	95900.00
Average Inventory ( C)	98700.00	95900.00
Inventory Turnover Ratio (A/C)	1.28	1.07
Debt to Asset Ratio
Total Liabilities (A)	121900.00	138400.00
Total Assets (B)	273500.00	244000.00
Debt Ratio (A/B)	0.45	0.57
Debt to Equity Ratio
Total Liabilities (A)	121900.00	138400.00
Total Equity (B)	151600.00	105600.00
Debt to Equity (A/B)	0.80	1.31