P14-3 Condensed balance sheet and income statement data for Kersenbrock Corpora- tion appear below.

 

KERSENBROCK CORPORATION

Balance Sheets December 31

 

 

 

Â	2012	Â	2011	Â	2010
Cash	$  25,000	Â	$  20,000	Â	$ 18,000
Receivables (net)	50,000	Â	45,000	Â	48,000
Other current assets	90,000	Â	95,000	Â	64,000
Investments	75,000	Â	70,000	Â	45,000
Plant and equipment (net)	400,000	Â	370,000	Â	358,000
Â	$640,000	Â	$600,000	Â	$533,000
Current liabilities	$  75,000	Â	$  80,000	Â	$ 70,000
Long-term debt	80,000	Â	85,000	Â	50,000
Common stock, $10  par	340,000	Â	310,000	Â	300,000
Retained earnings	145,000	Â	125,000	Â	113,000
Â	$640,000	Â	$600,000	Â	$533,000

                                                                 

 

KERSENBROCK CORPORATION

Income Statements

For the Years Ended December 31

 

Â	2012	Â	2011
Sales	$740,000	Â	$700,000
Less: Sales returns and allowances	40,000	Â	50,000
Net sales	700,000	Â	650,000
Cost of goods sold	420,000	Â	400,000
Gross profit	280,000	Â	250,000
Operating expenses (including income  taxes)	235,000	Â	220,000
Net income	$ 45,000	Â	$ 30,000

 

                      

 

 

Additional information:

1.   The market price of Kersenbrock’s common stock was $4.00, $5.00, and $8.00 for 2010, 2011, and 2012, respectively.

2.   All dividends were paid in cash.

Instructions

(a)   Compute the following ratios for 2011 and 2012.

(1)   Profit margin.

(2)   Asset turnover.

(3)   Earnings per share. (Weighted-average common shares in 2012 were 32,000 and in 2011 were 31,000.)

(4)   Price-earnings.

(5)   Payout.

(6)   Debt to total assets.

(b)   Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2011 to 2012 of Kersenbrock Corporation.