Data for Spain Corporation in 2011and 2010 follow. These data should be used in conjunction with the data in P 6.

Selected balances at the end of 2009 were accounts receivable (net), $90,000; inventory, $270,000; total assets, $750,000; accounts payable, $150,000; and stockholders’ equity, $350,000. All Spain’s notes payable were current liabilities; all its bonds payable were long-term liabilities.

Required

Perform a comprehensive ratio analysis. Round all answers to one decimal place.

1. Prepare a liquidity analysis by calculating for each year the (a) current ratio, (b) quick ratio, (c) receivable turnover, (d) days’ sales uncollected, (e) inventory turnover, (f) days’ inventory on hand, (g) payables turnover, and (h) days’ payable.

2. Prepare a profitability analysis by calculating for each year the (a) profit margin, (b) asset turnover, (c) return on assets, and (d) return on equity.

3. Prepare a long-term solvency analysis by calculating for each year the (a) debt to equity ratio and (b) interest coverage ratio.

4. Prepare a cash flow adequacy analysis by calculating for each year the (a) cash flow yield, (b) cash flows to sales, (c) cash flows to assets, and (d) free cash flow.

5. Prepare a market strength analysis by calculating for each year the (a) price/ earnings (P/E) ratio and (b) dividends yield.

6. After making the calculations, indicate whether each ratio improved or deteriorated from 2010 to 2011 (use F for favorable and U for unfavorable and consider changes of 0.1 or less to be neutral).

Transcribed Image Text:

2010 2011 Net cash flows from opcrating activitics Net capital expenditures Dividends paid Number of common shares Market price per share ($50,000) $26,000 $20,000 $12,000 10,000 $25 $10,000 $10,000 10,000 $20