acc-486 problem 7-10

Project Description:

7-10 consecutive five-year balance sheets and income statements of laura gibson corporation are shown below and on the following page.
a. compute the following for the years ended december 31, 2007–2011:
1. times interest earned
2. fixed charge coverage
3. debt ratio
4. debt/equity ratio
5. debt to tangible net worth
b. comment on the debt position and the trends indicated in the long-term debt-paying ability.
laura gibson corporation
balance sheets
december 31, 2007 through december 31, 2011
(dollars in thousands) 2011 2010 2009 2008 2007
assets
current assets:
cash $ 27,000 $ 26,000 $ 25,800 $ 25,500 $ 25,000
accounts receivable, net 135,000 132,000 130,000 129,000 128,000
inventories 128,000 130,000 134,000 132,000 126,000
total current assets 290,000 288,000 289,800 286,500 279,000
property, plant, and equipment, net 250,000 248,000 247,000 246,000 243,000
intangibles 20,000 18,000 17,000 16,000 15,000
total assets $560,000 $554,000 $553,800 $548,500 $537,000
(dollars in thousands) 2011 2010 2009 2008 2007
liabilities and shareholders’ equity
current liabilities:
accounts payable $75,000 $76,000 $76,500 $77,000 $78,000
income taxes 13,000 13,500 14,000 13,000 13,500
total current liabilities 88,000 89,500 90,500 90,000 91,500
long-term debt 170,000 168,000 165,000 164,000 262,000
shareholders’ equity 302,000 296,500 298,300 294,500 183,500
total liabilities and
shareholders’ equity $560,000 $554,000 $553,800 $548,500 $537,000
laura gibson corporation
statement of earnings
for the years ended december 31, 2007–2011
(in thousands, except per share) 2011 2010 2009 2008 2007
net sales $920,000 $950,000 $910,000 $850,000 $800,000
cost of goods sold 640,000 648,000 624,000 580,000 552,000
gross margin 280,000 302,000 286,000 270,000 248,000
selling and administrative
expense 156,000 157,000 154,000 150,000 147,000
interest expense 17,000 16,000 15,000 14,500 23,000
earnings from continuing
operations before income taxes $107,000 $129,000 $117,000 $105,500 $ 78,000
income taxes 36,300 43,200 39,800 35,800 26,500
earnings from continuing
operations 70,700 85,800 77,200 69,700 51,500
discontinued operating earnings (loss), net of taxes:
from operations (1,400) 1,300 1,400 1,450 1,600
on disposal (900) — — — —
earnings (loss) from discontinued
operation (2,300) 1,300 1,400 1,450 1,600
net earnings $68,400 $87,100 $78,600 $71,150 $53,100
earnings (loss) per share:
continuing operations $1.53 $1.69 $1.46 $1.37 $1.25
discontinued operations (0.03) 0.01 0.01 0.01 0.01
net earnings per share $1.50 $1.70 $1.47 $1.38 $1.26
note: operating lease payments were as follows: 2011, $30,000; 2010, $27,000; 2009, $28,500; 2008, $30,000; 2007, $27,000 (dollars in thousands).
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