Question

The financial statements of Divine Company are presented here.
DIVINE COMPANY
Income Statement
For the Year Ended December 31, 2014
Net sales.......... $700,000
Cost of goods sold....... 400,000
Selling and administrative expenses. 150,000
Interest expense....... 7,800
Income tax expense....... 43,000
Net income......... $ 99,200
DIVINE COMPANY
Balance Sheet
December 31, 2014
Assets
Current assets
Cash.......... $ 22,100
Debt investments....... 34,800
Accounts receivable (net) ... 90,700
Inventory.................. 155,000
Total current assets...... 302,600
Plant assets (net) ....... 461,300
Total assets ........ $763,900
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable....... $119,700
Income taxes payable.... 29,000
Total current liabilities..... 148,700
Bonds payable....... 110,000
Total liabilities ....... 258,700
Stockholders’ equity
Common stock........ 170,000
Retained earnings ........ 335,200
Total stockholders’ equity .... 505,200
Total liabilities and stockholders’ equity.... $763,900
Net cash provided by operating activities.. $61,300
Capital expenditures....... $42,000
Dividends paid........... $10,000
Average number of shares outstanding.. 65,000

Instructions
(a) Compute the following values and ratios for 2014. (We provide the results from 2013 for comparative purposes.)
(i) Current ratio. (2013: 2.4:1)
(ii) Working capital. (2013: $178,000)
(iii) Debt to assets ratio. (2013: 31%)
(iv) Free cash flow. (2013: $13,000)
(v) Earnings per share. (2013: $1.35)
(b) Using your calculations from part (a), discuss changes from 2013 in liquidity, solvency, and profitability.



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  • CreatedApril 07, 2014
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