Maurice Tutor
$15/per page/Negotiable
Horizontal Analysis and Ratios - The following are comparative financial statements of the Cohen Company for 2006, 2007, and 2008:
|
Comparative Income Statements |
||||
|
For Years Ended December 31, |
||||
|
2008 |
2007 |
2006 |
||
|
Sales (net) |
$102,200 |
$91,500 |
$81,700 |
|
|
Cost of goods sold |
61,100 |
52,800 |
47,150 |
|
|
Gross profit |
$41,100 |
$38,700 |
$34,550 |
|
|
Selling expenses |
11,400 |
10,000 |
-8,900 |
|
|
Administrative expenses |
8,700 |
7,843 |
6,950 |
|
|
Interest expense |
3,000 |
4,000 |
4,000 |
|
|
Total expenses |
23,100 |
21,843 |
19,850 |
|
|
Income before income taxes |
$18,000 |
$16,857 |
$14,700 |
|
|
Income tax expense |
5,400 |
5,057 |
4,410 |
|
|
Net income |
$12,600 |
$11,800 |
$10,290 |
|
|
Earnings per share |
? |
? |
? |
|
|
Comparative Retained Earnings Statements |
||||
|
Comparative Retained Earnings Statements |
||||
|
2008 |
2007 |
2006 |
||
|
Beginning retained earnings |
$28,800 |
$20,800 |
$14,310 |
|
|
Add: Net income |
12,600 |
11,800 |
10,290 |
|
|
$41,400 |
$32,600 |
$24,600 |
||
|
Less: Dividends distributed |
-4,410 |
3,800 |
3,800 |
|
|
Ending retained earnings |
$36,990 |
$28,800 |
$20,800 |
|
|
Comparative Balance Sheets |
||||
|
December 31, |
||||
|
2008 |
2007 |
2006 |
||
|
Cash |
$4,200 |
$4,000 |
$4,100 |
|
|
Receivables (net) |
7,600 |
7,000 |
6,200 |
|
|
Inventories |
9,800 |
9,000 |
8,600 |
|
|
Noncurrent assets |
119,390 |
112,000 |
107,100 |
|
|
Total Assets |
$140,990 |
$132,000 |
$126,000 |
|
|
Current liabilities |
$12,000 |
$10,000 |
$12,000 |
|
|
Bonds payable, 10% |
30,000 |
40,000 |
40,000 |
|
|
Common stock, $2 par |
8,400 |
7,600 |
7,600 |
|
|
Premium on common stock |
53,600 |
45,600 |
45,600 |
|
|
Retained earnings |
36,990 |
28,800 |
20,800 |
|
|
Total Liabilities and Stockholders’ Equity |
$140,990 |
$132,000 |
$126,000 |
|
Additional information: Credit sales were 65% of net sales in 2007 and 60% in 2008. At the beginning of 2008, 400 shares of common stock were issued, the first sale of stock in several years. The Cohen Company is concerned. Although it increased the dividends paid per share by 5% in 2008 and its 2008 net income is higher than 2007 net income, the market price of its common stock dropped from $22 per share at the beginning of 2008 to $21 per share at year-end.
Required
1. For 2006, 2007, and 2008, prepare horizontal analyses for the Cohen Company using a year-to-year approach.
2. For 2007 and 2008, compute the following ratios:
a. Current
b. Acid-test
c. Inventory turnover
d. Receivables turnover
e. Earnings per share
f. Dividend yield
g. Return on total assets
h. Return on stockholders’ equity
i. Debt
3. Based on your results, discuss the possible reasons for the decrease in the market price per share in 2008.