Exercise 1 - The comparative condensed balance sheets of Conard Corporation are presented below:
CONARD CORPORATION Comparative Condensed Balance Sheets December 31
2012 2011
Assets
Current assets $74,000 $80,000
Property, plant, and equipment (net) 99,000 90,000
Intangibles 27,000 40,000
Totals assets $200,000 $210,000
Liabilities and stockholder's equity
Current liabilities $42,000 $48,000
Long-term liabilities 143,000 150,000
Stockholders' equity 15,000 12,000
Total liabilities and Stockholders' equity $200,000 $210,000
Instructions:
(a) Prepare a horizontal analysis of the balance sheet data for Conard Corporation using 2011 as a base.
(b) Prepare a vertical analysis of the balance sheet data for Conard Corporation in columnar form for 2012.
Exercise 2 - Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data for the year ending January 31, 2009, are shown below:
NORDSTROM, INC. Balance Sheet (partial) (in millions) End-of-Year Beginning-of-Year
Cash and cash equivalents $72 $358
Accounts receivable (net) 1,942 1,788
Merchandise inventory 900 956
Prepaid expenses 93 78
Other current assets 210 181
Total current assets $3,217 $3,361
Total current assets $1,601 $1,635
For the year,, net credit sales were $8,272, and cost of goods sold was $5,417 (in millions).
Instructions:
(a) Compute the four liquidity ratios at the end of the year.
(b) Using the data in the chapter, compare Nordstrom's liquidity with (1) that of J.C. Penney Company, and (2) the industry averages for department stores.
Exercise 3 - Bennis Company has the following comparative balance sheet data.
BENNIS COMPANY Balance Sheet December 31
2012 2011
Cash $15,000 $30,000
Receivables (net) 70,000 60,000
Inventories 60,000 50,000
Plant assets (net) 200,000 180,000
$345,000 $320,000
Accounts payable $50,000 $60,000
Mortagae payable (15%) 100,000 100,000
Common stock, $10 par 140,000 120,000
Retained earnings 55,000 40,000
$345,000 $320.00
Additional information for 2012:
1. Net income was $25,000.
2. Sales on account were $410,000. Sales returns and allowances were $20,000.
3. Cost of goods sold was $198,000.
4. The allowance for doubtful accounts was $2,500 on December 31, 2012, and $2,000 on December 31,2011.
Instructions:
Compute the following ratios at December 31, 2012.
(a) Current.
(b) Acid-test.
(c) Receivables turnover.
(d) Inventory turnover.
Exercise 4 - The income statement for Christensen, Inc., appears below.
CHRISTENSEN, INC. Income Statement For the Year Ended December 31, 2011
Sales $400,000
Cost of goods sold 230,000
Gross profit 170,000
Expenses (including $16,000 interest and $24,000 income taxes) 105,000
Net income $65,000
Additional information:
1. The weighted-average common shares outstanding in 2011 were 30,000 shares.
2. The market price of Christensen, Inc. stock was $13 in 2011.
3. Cash dividends of $26,000 were paid, $5,000 of which were to preferred stockholders.
Instructions:
Compute the following ratios for 2011.
(a) Earnings per share.
(b) Price-earnings.
(c) Payout.
(d) Times interest earned.