The rate of return on common stockholders equity

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Reference no: EM13831283

a. Tanfield is in a better position to pay debt in 2015 than in 2014. The current ratio, cash ratio, and times-interest-earned ratio all improved. The inventory turnover improved, but was offset by a decrease in the gross profit percentage.

b. The attractiveness of Tanfield's stock has improved in 2015. The rate of return on common stockholder's equity increased as well as the earnings per share and price/earnings ratio.

 

2015

2014

 a.

Total current assets

$364,000

=

1.6

$370,000

=

1.54

Total current liabilities

$227,000

$240,000

b.

Cash + Cash

$91,000 + 0

 =

0.4

$88,000 + 0

=

0.37

equivalents

$227,000

$240,000

Total current liabilities

c.

Net income + Income

$51,000 +

=

6.38

$37,000 + 21,000

=

4.63

tax expense + Interest

19,000 +13,000

16,000

expense

$13,000

$16,000

Interest expense

d.

Cost of Goods Sold

$239,000

=

1.58

$212,000

=

1.17

Average Merchandise

($144,000 +

($158,000 +

Inventory

158,000) / 2

204,000) / 2

e.

Gross Profit

$221,000

=

48.00%

$210,000

=

 49.80%

Net Sales

$460,000

$422,000

f.

Total Liabilities

$344,000

 =

1.45

$336,000

=

1.60

       Total Equity 

$237,000

=

36.70%

$210,000

g.

Net income - Preferred dividends

$51,000 - (3% A

92,000)

 =

 

$4.39

$37,000 - (3% x

 =

 

 

33.10%

 

 

10,000

92,000)

Average Common

Stockholder's Equity

($145,000 +

118,000)/2 / 2

 

 

($118,000 +

 

 

89,000) / 2

 

 

 

 

Net income -

$48,240

 

 

$34,240

h.

Preferred dividends

 

 =

 

 

 

 

 

 =

 

 

 

 $3.42

Weighted average number of common shares outstandin

(12,000 +

 

 

 

10,000) / 2

 

 

 

i.

Market Price per share

$86.58

=

19.72

$46.54

=

13.6

of common stock

$4.39

$3.42

Earnings Per Share

Reference no: EM13831283

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