Chapter_17_assignment_Sept 20

| August 14, 2017

Assignment 1.
The McConnell Department Stores, Inc. chief
executive officer (CEO) has asked you to compare the company’s profit
performance and financial position with the averages for the industry. The CEO
has given you the company’s income statement and balance sheet, as well as the
industry average data for retailers.

MCCONNEL
DEPARTMENT STORES, INC.
Income Statement Compared
with Industry Average
Year Ended December 31, 2014

McConnell Industry Average
Net
Sales $777,000 100.0%
Cost
of Goods Sold _522,816___ 65.8 _
Gross
Profit
255,184 34.2
Operating
Expenses _161,046 19.7 _
Operating
Income 94,138 14.5
Other
Expenses _____4,668 0.4 _
Net
Income $ 89,470 14.1 %

MCCONNELL
DEPARTMENT STORES, INC.
Balance Sheet Compared with
Industry Average
December 31, 20144

McConnell Industry Average
Current Assets $ 325,440 70.9%
Fixed Assets, Net 120,960 23.6
Intangible Assets,
Net 8,640 0.8
Other Assets _ 24,960 4.7 _ Total Assets _$
480,000 _ 14.1% _

Current
Liabilities $ 222,720 48.1%
Long-term
Liabilities _ 107,520
16.6 _
Total Liabilities
330,240 64.7
Stockholders’ Equity _ 149,760 35.3 _

Total
Liabilities and
Stockholders’
Equity $ 480,000
100.0%

Assignment : Prepare a vertical analysis for McConnell for
both its income statement and balance sheet.

Assignment 2. Comparative financial statement data of
Danfield, Inc. follow:

DANFIELD,
INC.
Comparative Income Statement
Years Ended December 31, 2015
and 2014

2015 2014 _
Net
Sales $ 467,000 $ 428,000
Cost
of Goods Sold 237,000
218,000
Gross
Profit 230,000 210,000
Operating
Expenses 136,000
134,000
Income
From Operations 94,000
76,000
Interest
Expense 9,000 10,000
Income
Before Income Tax 85,000 66,000
Income
Tax Expense 24,000 27,000
Net Income $
61,000
$ 39,000

DANFIELD,
INC.
Comparative
Balance Sheet
December
31, 2015 and 2014

2015 2014 2013*
ASSETS

Current Assets:
Cash $ 97,000
$ 95,000
Accounts
Receivable 112,000 118,000 $ 102,000
Merchandise
Inventory 145,000 163,000 203,000
Prepaid
Expenses 12,000 5,000
Total Current Assets $ 577,000 $
560,000 598,000

Liabilities

Total Current Liabilities $ 225,000 $ 246,000
Long-term Liabilities 114,000 97,000
Total Liabilities 339,000
343,000

Stockholders’ Equity

Preferred Stock, 3% 108,000 108,000
Common Stockholders’ Equity, no par 130,000 109,000 85,000
Total Liabilities and
Stockholders’ Equity $
577,000
$ 560,000

1.
Market price of Danfield’s common stock: $86.58 at
December 31, 2015, and $46.54 at December 31, 2014.
2.
Common shares outstanding: 12,000 during 2015 and
10,000 during 2014 and 2013.
3.
All sales are on credit.

Assignment:
A Compute the following ratios for 2015 and
2014:
1.
Current Ratio
6. Debt to equity ratio
2.
Cash Ratio 7. Rate of return common
stockholders’ equity
3.
Times-interest-earned ratio 8. Earnings per share
of common stock
4.
Inventory turnover 9.
Price/earnings ratio
5.
Gross Profit percentage

B.
Decide (a) whether Danfield’s ability to pay debts and to sell inventory
improved or deteriorated during 2015 and (b) whether the investment
attractiveness of its common stock appears to have increased or decreased.

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