Condensed balance sheet and income statement data for Jergan Corporation are presented here.

 

Additional information:

1. The market price of Jergan’s common stock was $7.00, $7.50, and $8.50 for 2017, 2018, and 2019, respectively.

2. You must compute dividends paid. All dividends were paid in cash.

Instructions

(a) Compute the following ratios for 2018 and 2019.

(1) Profit margin.

(2) Gross profit rate.

(3) Asset turnover. 

(4) Earnings per share.

(5) Price-earnings ratio.

(6) Payout ratio.

(7) Debt to assets ratio.

(b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in the financial position and operating results from 2018 to 2019 of Jergan Corporation.

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JERGAN CORPORATION Balance Sheets December 31 2019 Cash Accounts receivable (net) Other current assets Investments Plant and equipment (net) 30,000 50,000 90,000 55,000 500,000 725,000 2018 20,000 45,000 95,000 70,000 370,000 $600,000 2017 S 18,000 48,000 64,000 45,000 358,000 $533,000 Current liabilities Long-term debt Common stock, $10 par Retained earnings 85,000 145,000 320,000 175,000 725,000 80,000 85,000 310,000 125,000 $600,000 S 70,000 50,000 300,000 113,000 $533,000 JERGAN CORPORATION Income Statements For the Years Ended December 31 2019 $740,000 $600,000 2018 Sales revenue Less: Sales returns and allowances 30,000 Net sales Cost of goods sold Gross profit Operating expenses (including income taxes) 180,000 50,000 Net income 40,000 700,000 425,000 275,000 570,000 350,000 220,000 95,000 70,000