Problem:
The financial statements of Lewis Company appear below:
LEWIS COMPANY
Comparative Balance Sheet
December 31,
Assets 2010 2009
Cash .................................................................................................. $ 25,000 $ 40,000
Marketable securities ........................................................................ 20,000 60,000
Accounts receivable (net) ................................................................. 40,000 30,000
Inventory ........................................................................................... 150,000 170,000
Property, plant and equipment (net) ................................................. 170,000 200,000
Total assets ................................................................................. $405,000 $500,000
Liabilities and stockholders' equity
Accounts payable ............................................................................. $ 25,000 $ 30,000
Short-term notes payable ................................................................. 40,000 90,000
Bonds payable .................................................................................. 75,000 160,000
Common stock ................................................................................. 175,000 145,000
Retained earnings ............................................................................. 90,000 75,000
Total liabilities and stockholders' equity....................................... $405,000 $500,000
LEWIS COMPANY
Income Statement
For the Year Ended December 31, 2010
Net sales (all on credit) ..................................................................... $360,000
Cost of goods sold ............................................................................ 184,000
Gross profit ....................................................................................... 176,000
Expenses
Interest expense ......................................................................... $21,000
Selling expenses ......................................................................... 30,000
Administrative expenses ............................................................. 20,000
Total expenses ...................................................................... 71,000
Income before income taxes ............................................................ 105,000
Income tax expense ......................................................................... 30,000
Net income ....................................................................................... $ 75,000
Additional information:
a. Cash dividends of $50,000 were declared and paid on common stock in 2010.
b. Weighted-average number of shares of common stock outstanding during 2010 was 62,000 shares.
c. Market value of common stock on December 31, 2010, was $15 per share.
d. Net cash provided by operating activities for 2010 was $65,000.
Instructions
Using the financial statements and additional information, compute 5 of the following ratios for the Lewis Company for 2010. Show all computations.
1. Current ratio _________.
2. Return on common stockholders' equity _________.
3. Profit margin ratio _________.
4. Return on assets _________.
5. Cash debt coverage ratio _________.