Question 1: There is a 2009 income statement and balance sheet for Gerrard Construction Co. What other financial statements are required? What information would these statements communicate that could not be determined by reviewing only the income statement and balance sheet?
Question 2: Briefly describe the note disclosures that should be provided by Gerrard Construction Co. and explain why note disclosures are considered an integral part of the financial statements.
Question 3: Assume that the balance of "Accounts Receivable, net" at December 31, 2008, was $8,200. Calculate the following activity measures for Gerrard Construction Co. for the year ended December 31, 2009:
1. Accounts receivable turnover.
2. Number of days' sales in accounts receivable.
Question 4: Calculate the following financial leverage measures for Gerrard Construction Co. at December 31, 2009:
1. Debt ratio
2. Debt/equity ratio.
Question 5: Gerrard Construction Co. wishes to lease some new earthmoving equipment from Caterpillar on a long-term basis. What impact (increase, decrease, or no effect) would a capital lease of $4 million have on the company's debt ratio and debt/equity ratio? (Note that these items were computer in part b and do not need to be recomputed for this requirement).
Question 6: Review the answer noted in the Excel sheet in red at the bottom marked "f." Assume that Gerrard Construction Co. had 2,400,000 shares of $1 par value common stock outstanding through 2009, and that the market price per share of common stock at December 31, 2009, was $18.75. Calculate the following profitability measures for the year ended December 31, 2009:
1. Earnings per share of common stock.
2. Price/earnings ratio.
3. Dividend yield.
4. Dividend payout ratio.
| Gerrard Construction Co. |
|
|
|
| For the Year Ended December 31, 2009 (in thousands) |
|
|
| Net revenues |
32,200 |
| Cost of services provided |
11,400 |
| Depreciation expense |
6,500 |
| Operating income |
14,300 |
| Interest expense |
3,800 |
| Income tax expense |
3,200 |
| Net income |
7,300 |
|
|
| At December 31, 2009 |
|
| Assets |
|
| Cash and short-term investments |
2,800 |
| Accounts receivable, net |
9,800 |
| Property, plant and equipment, net |
77,400 |
| Total assets |
90,000 |
|
|
| Liabilities and Owners' Equity |
|
| Accounts payable |
1,500 |
| Income taxes payable |
1,600 |
| Notes payable (long term) |
47,500 |
| Paid-in-capital |
10,000 |
| Retained earnings |
29,400 |
| Total liabilities and owners' equity |
90,000 |
|
|
|
|
| Dividends Declared and Paid during year 2009 is $500 |