PART I
Using the data from Problem 23.1B, Grace’s Art Shop, Inc., calculate the following financial ratios. Comment on any ratio that merits further consideration. Inventory on December 31, 2018, was $20,000.
1. Current ratio
2. Acid-test ratio
3. Inventory turnover
4. Return on sales
5. Earnings per share of common stock
6. Book value per share of common stock
7. Return on total assets
8. Ratio of stockholders’ equity to total equities
9. Ratio of stockholders’ equity to total liabilities
10. Rate of return on ending stockholders’ equity
11. The dividend yield per share of common stock. Assume a dividend of $1.00 per share was paid in 2019 and $0.50 per share was paid in 2018. The market value per share of common stock in 2019 was $2.50 and in 2018 was $1.50.
PART II
Selected industry ratios are given below. Compare the ratios of Grace’s Art Shop, Inc., with these ratios.
1. Rate of return on sales, 8 percent
2. Return on total assets, 10 percent
3. Merchandise inventory turnover, 6 times
4. Current ratio, 2.5 to 1
Analyze: Based on the analysis you have performed, do you see a trend that could affect the company’s stock in the next fiscal year?