Income Statements
Question Description
Write a 700- to 1,050-word Executive Summary using your solutions from P13-2.
Analyze the liquidity, solvency and profitability of Wahlberg Company.
Recommend with supporting points, whether the Company should be considered as an acquisition target.
Following your reference page, include an outline that you used to develop your summary
The comparative statements of Wahlberg Company are presented here.
Problem 13-A2
| WAHLBERG COMPANY Income Statements For the Years Ended December 31 |
||||
| 2017 | 2016 | |||
| Net sales | $1,890,540 | $1,750,500 | ||
| Cost of goods sold | 1,058,540 | 1,006,000 | ||
| Gross profit | 832,000 | 744,500 | ||
| Selling and administrative expenses | 500,000 | 479,000 | ||
| Income from operations | 332,000 | 265,500 | ||
| Other expenses and losses | ||||
| Interest expense | 22,000 | 20,000 | ||
| Income before income taxes | 310,000 | 245,500 | ||
| Income tax expense | 92,000 | 73,000 | ||
| Net income | $ 218,000 | $ 172,500 | ||
| WAHLBERG COMPANY Balance Sheets December 31 |
||||
| Assets | 2017 | 2016 | ||
| Current assets | ||||
| Cash | $ 60,100 | $ 64,200 | ||
| Debt investments (short-term) | 74,000 | 50,000 | ||
| Accounts receivable | 117,800 | 102,800 | ||
| Inventory | 126,000 | 115,500 | ||
| Total current assets | 377,900 | 332,500 | ||
| Plant assets (net) | 649,000 | 520,300 | ||
| Total assets | $1,026,900 | $852,800 | ||
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities | ||||
| Accounts payable | $ 160,000 | $145,400 | ||
| Income taxes payable | 43,500 | 42,000 | ||
| Total current liabilities | 203,500 | 187,400 | ||
| Bonds payable | 220,000 | 200,000 | ||
| Total liabilities | 423,500 | 387,400 | ||
| Stockholders’ equity | ||||
| Common stock ($5 par) | 290,000 | 300,000 | ||
| Retained earnings | 313,400 | 165,400 | ||
| Total stockholders’ equity | 603,400 | 465,400 | ||
| Total liabilities and stockholders’ equity | $1,026,900 | $852,800 | ||
All sales were on account. Net cash provided by operating activities for 2017 was $220,000. Capital expenditures were $136,000, and cash dividends were $70,000.
Compute the following ratios for 2017. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%.)
| (a) | Earnings per share | $ 3.61 |
|||
| (b) | Return on common stockholders’ equity | 39.83 |
% | ||
| (c) | Return on assets | 22.26 |
% | ||
| (d) | Current ratio | 1.84 |
:1 | ||
| (e) | Accounts receivable turnover | 16.73 |
times | ||
| (f) | Average collection period | 21.82 |
days | ||
| (g) | Inventory turnover | 8.71 |
times | ||
| (h) | Days in inventory | 41.91 |
days | ||
| (i) | Times interest earned | 14.24 |
times | ||
| (j) | Asset turnover | 1.98 |
times | ||
| (k) | Debt to assets ratio | 42.17 |
% | ||
| (l) | Free cash flow | $28218 |
