The following are comparative financial statements of the Cohen Company for 2006, 2007, and 2008:

Additional information: Credit sales were 65% of net sales in 2007 and 60% in 2008. At the beginning of 2008, 400 shares of common stock were issued, the first sale of stock in several years.
The Cohen Company is concerned. Although it increased the dividends paid per share by 5% in 2008 and its 2008 net income is higher than 2007 net income, the market price of its common stock dropped from $22 per share at the beginning of 2008 to $21 per share at year-end.

Required
1. For 2006, 2007, and 2008, prepare horizontal analyses for the Cohen Company using a year-to-year approach.
2. For 2007 and 2008, compute the following ratios:
a. Current
b. Acid-test
c. Inventory turnover
d. Receivables turnover
e. Earnings per share
f. Dividend yield
g. Return on total assets
h. Return on stockholders' equity
i. Debt
3. Based on your results, discuss the possible reasons for the decrease in the market price per share in2008.

Transcribed Image Text:

Comparative Income Statements For Years Ended December 31 $ 91,500 $38,700 2008 $102,200 2007 2006 S 81,700 Cost of goods sold Gross profit 61,100 (52.800 (47,150) S 41,100 (11,400) 8,700 34,550 8,900 6,950 0,000 Administrative expenses Interest expense (7,843) Total expenses Income before income taxes Income tax expense Net income Earnings per share (3,000 (4.000 (4,000 $16,857 S 11,800 ) (21,843) 23,100 18,000 5,400(5.057 (19,850) 14,700 (4410) Comparative Retained Earnings Statements For Years Ended December 31 2008 2007 2006 Beginning retained earnin Add: Net income 14,310 10,290 S 28,800 $ 41,400 S 36,990 $ 20,800 11,800 $ 32,600 (440 (3,.80o (3,800) 28,800 gs 12,600 $ 24,600 Less: Dividends distributed retained earnings $ 20,800 Comparative Balance Sheets December 31 2008 2007 2006 Cash Receivables (net) Inventories Noncurrent assets Total Assets Current liabilities Bonds payable, 10% Common stock, $2 par 7,600 9,800 119,390 S 4,000 7,000 9,000 112,000 S 4,100 6,200 8,600 107,100 140,990 $132,000 S 12,000 30,000 8,400 53,600 36,990 Total Liabilities and Stockholders Equity $140,990 S 10,000 40,000 $ 12,000 40,000 7,600 45,600 20,800 126,000 45,600 28,800 $132,000 Premium on common Retained earmings