(L. OBJ. 4) Using ratios to evaluate a stock investment [40—50 min] Comparative financi...

(L. OBJ. 4) Using ratios to evaluate a stock investment [40—50 min]

Comparative financial statement data of Sanfield, Inc., follow:

1. Marker price of Sanfields common stock: $81.26 at December 31, 2011, and $67.20 at December 31, 2010.

2. Common shares outstanding: 10,000 during 2011 and 9,000 during 2010.

3. All sales on credit.

Requirements

1. Compute the following ratios for 2011 and 2010:

a. Current ratio

b. Times-interest-earned ratio

c. Inventory turnover

d. Return on Common stockholders’ equity

e. Earnings per share of common stock

f. Price/earnings ratio

2. Decide (a) whether Sanfield’s ability to pay debts and to sell inventory improved or deteriorated during 2011 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.