Question

As a consultant to MCR Company, you are told it is considering the acquisition of Lakeland Corporation. MCR Company requests that you prepare certain financial statistics and analysis forYear 5 and Year 4 using Lakeland’s financial statements that follow:






1. Inventory at January 1, Year 4, is $6,850,000.
2. Market prices of common stock at December 31, Year 5 and Year 4, are $73.50 and $47.75, respectively.
3. Cash dividends for both preferred and common stock are declared and paid in June and December of each year.
The stock dividend on common stock is declared and distributed in August of Year 5.
4. Plant and equipment disposals during Year 5 and Year 4 are $375,000 and $425,000, respectively. Related accumulated depreciation is $215,000 in Year 5 and $335,000 in Year 4. At December 31, Year 3, the plant and equipment asset balance is $21,470,000, and its related accumulated depreciation is $11,650,000.

Required:
Compute the following financial ratios and figures for both Year 5 and Year 4. Identify and discuss any significant year-to-year changes.
At December 31: For year ended December 31:
a. Current ratio.
b. Acid-test ratio.
c. Book value per common share.
d. Gross profit margin ratio.
e. Days to sell inventory.
f. Times interest earned.
g. Common stock price-to-earnings ratio (end-of-year value).
h. Gross capitalexpenditures.


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  • CreatedJanuary 22, 2015
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