Condensed balance sheet and income statement data for Landwehr Corporation appear below:

Additional information:
1. The market price of Landwehr's common shares was $4.00, $5.00, and $8.00 for 2015, 2016, and 2017, respectively.
2. All dividends were paid in cash.
3. Weighted-average common shares were 32,000 in 2017 and 31,000 in 2016.
Instructions
(a) Calculate the following ratios for 2016 and 2017.
1. Profit margin
2. Asset turnover
3. Earnings per share
4. Price-earnings ratio
5. Payout ratio
6. Debt to total assets
7. Gross profit margin
(b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in Landwehr Corporation's financial position and operating results from 2016 to 2017.
TAKING IT FURTHER
Roberto Landwehr is puzzled. He believes the profit margin of Landwehr is an indication the company is doing well. Julie Beck, his accountant, says that more information is needed to determine the firm's financial well-being. Who is correct? Why?

Transcribed Image Text:

LANDWEHR CORPORATION Balance Sheet December 31 2016 2015 Cash Accounts receivable Other current assets Property, plant, and equipment (net) 20018,000 20,000 45,000 95,000 440,000 $600,000 25,000 50,000 90,000 475,000 $640,000 48,000 64,000 403,000 $533,000 Current liabilities 75,000 80,000 80,000 340,000 145,000 70,000 50,000 300,000 113,000 $533,000 Long-term debt Common shares 85,000 310,000 125,000 S600,000 Retained earnings S640,000 LANDWEHR CORPORATION Income Statement For the Year Ended December 31 Sales revenue Less: Sales returns and allowances Net sales Cost of goods sold Gross profit Operating expenses (including income taxes) Profit 2017 $740,000 40,000 700,000 420,000 280,000 235,000 45,000 2016 $700,000 50,000 650,000 400,000 250,000 220,000 30,000