Question

ACC 112 Project 1B The below represents the comparative financial statements of Kamla Corporation. Kamla Corporation Comparative Income Statement For the Years Ended December 31, 2016 and 2015 2016 2015 Net sales (all on account) $1,238,000 $1,006,000 Expenses: Cost of goods sold $826,000 $706,000 Selling and administrative 208,000 218,000 Interest expense 14,000 12,000 Income tax expense 35,000 23,000 Total expenses $1,083,000 $959,000 Net income $155,000 $47,000 || 2015 Kamla Corporation Comparative Balance Sheet December 31, 2016 and 2015 Assets 2016 Current assets: Cash $38,000 Notes receivable 36,000 Accounts receivable (net) 171,600 Inventory 182,000 Total current assets 427,600 Property, plant, and equipment (net) 850,000 Total assets $1,277,600 ities and Stockholders' Equity Liabilities and Stockholders' Equity Current liabilities: $37,700 28,200 149,600 135,400 350,900 778,000 $1,128,900

Answer 1

Profit margin ration = Net income / Net Sales
Values given
Net Income = $ 155,000
Net Sales = $ 1,238,000
Profit margin ratio = 155000/1238000
=12.52%
The Company earns 12.52% on each dollar of Sales as Net Profit every period
Asset turnover ratio = Net Sales / Average Total Assets
Value given
Net Sales = $ 1,238,000
Beginning Total Assets = $ 1,128,900
Ending Total Assets = $ 1,277,600
Average Total Assets = ( Beginning Total Assets + Ending Total Assets)/2
= (1128900+1277600)/2
= $ 1,203,250
Asset turnover ratio = 1,238.000/1,203,250
= 1.03 times
The Company generates $ 1.03 of Net Sales for each dollar it invests in its Total assets
Return on assets = Net Income / Average Total Assets
Value given
Net Income = $ 155,000
Beginning Total Assets = $ 1,128,900
Ending Total Assets = $ 1,277,600
Average Total Assets = ( Beginning Total Assets + Ending Total Assets)/2
= (1128900+1277600)/2
= $ 1,203,250
Return on assets = 155,000/1,203,250
= 12.88%
The Company earns 12.88% on each dollar invested in its Total Assets as Net Income every period
Return on common stockholders' equity = Net Income / Average Common Stockholders' Equity
Value given
Net Income = $ 155,000
Beginning Common Stock Holders' Equity = $ 687,500
Ending Common Stock Holders' Equity = $ 758,000
Average Common Stock Holders' Equity = (Beginning Common Stock Holders' Equity+Ending Common Stock Holders' Equity)/2
= ($ 687,500+$ 758,000)/2
= $ 722,750
Return on common stockholders' equity = 155,000 / 722,750
= 21.45%
The Company earns 21.45% on each dollar invested by its Common Stockholders
Earnings per share = Net Income/Weighted Average Common Shares Outstanding
Value given
Net Income = $ 155,000
Weighted Average Common Shares Outstanding = 90,000
Earnings per share = 155,000/90,000
= 1.72
The Company earns $ 1.72 of Net Income on each outstanding common stock share
Price Earning Ratio = Market Value Price per Share/ Earning Per Share
Value given
Earning Per Share = $ 1.72
Market Value Price per Share = $ 40
Price Earning Ratio = 40/1.72
= $ 23.26
The Company stock Sells for 23.26 times the amount that the company earns on each share
Payout Ratio = Dividend Per Share/Earning Per Share
Computation of Dividend paid
Beging Balance of Retained Earnings + Net Income - Dividend = Ending Balance of Retained Earnings
Dividend = Beging Balance of Retained Earnings + Net Income - Ending Balance of Retained Earnings
= $ 387,500 + $ 155,00 - $ 458,000
= $ 84,500
Note - It has been assumed that there has been no other transaction in the Retained Earnings Account
during the financial year except for payment of dividend
Dividend per share = Dividend Payout/Weighted Average Common Shares Outstanding
= 84,500/90,000
= $ 0.94
Payout Ratio = Dividend Per Share/Earning Per Share
= 0.94/1.72
= 54.65%
The Company distributes 54.65% of its earnings in form of Dividends
Debt to total assets ratio = Total Liabilities/Total Assets
Value given
Total Liabilities = $ 519,600
Total Assets = $ 1.277,600
Debt to total assets ratio = 519,600/1,277,600
= 40.67%
40.67% of the company's Total Assets was provide by Debt
Times interest earned ratio = Earnings before interest and taxes / Interest Expenses
Computation of Earnings before interest and taxes
Net Income			$155,000
Add: Interest Expense			$14,000
Add: Income Tax Expense			$35,000
Earnings before interest and taxes			$204,000
Times interest earned ration = 204,000/14,000
= 14.57 times
The Company can cover its Interest Expenses approximately 14.57 times per year/period