Analyzing Comparative Financial Statements Using Selected Ratios
Use the data given in PA13-1 for Pinnacle Plus.
Required:
1.Compute the gross profit percentages in 2010 and 2009. Round the percentages to one decimal place. Is the trend going in the right direction?
2.Compute the net profit margin ratios in 2010 and 2009. Round the percentages to one decimal place. Is the trend going in the right direction?
3.Compute the earnings per share for 2010 and 2009. Does the trend look good or bad? Explain.
4.Stockholders’ equity totaled $100,000 at the end of 2008. Compute the return on equity (ROE) ratios for 2010 and 2009. Express the ROE as percentages rounded to one decimal place. Is the trend going in the right direction?
5.Net property and equipment totaled $110,000 at the end of 2008. Compute the fixed asset turnover ratios for 2010 and 2009. Round the ratios to two decimal places. Is the trend going in the right direction?
6.Compute the debt-to-assets ratios for 2010 and 2009. Round the ratios to two decimal places. Is debt providing financing for a larger or smaller proportion of the company’s asset growth? Explain
7. Compute the times interest earned ratios for 2010 and 2009. Round the ratios to one decimal place. Do they look good or bad? Explain.
8.After Pinnacle Plus released its 2010 financial statements, the company’s stock was trading at $18. After the release of its 2009 financial statements, the company’s stock price was $15 per share. Compute the P/E ratios for both years, rounded to one decimal place. Does it appear that investors have become more (or less) optimistic about Pinnacle’s future success?
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