Condensed balance sheet and income statement data for Lauer Corporation appear below.

Additional information:

1. The market price of Lauer?s common shares was $4.00, $5.00, and $8.00 for 2019, 2020, and 2021, respectively.

2. All dividends were paid in cash.

3. Weighted-average common shares were 32,000 in 2021 and 31,000 in 2020.

Instructions

a. Calculate the following ratios for 2020 and 2021.

1. Gross profit margin

2. Asset turnover

3. Earnings per share

4. Price-earnings ratio

5. Payout ratio

6. Debt to total assets

7. Profit margin

b. Based on the ratios calculated, discuss briefl y the improvement or lack thereof in Lauer Corporation?s fi nancial position and operating results from 2020 to 2021.

Taking It Further

Mr. Lauer is puzzled. He believes the profit margin of Lauer Corporation is an indication the company is doing well. Brittany Qi, his accountant, says that more information is needed to determine the firm?s financial well-being. Who is correct? Why?

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LAUER CORPORATION Balance Sheet December 31 2021 2020 2019 Cash Accounts receivable $ 25,000 $ 20,000 45,000 $ 18,000 50,000 48,000 Other current assets 90,000 95,000 64,000 Property, plant, and equipment (net) 475,000 440,000 403,000 $640,000 $600,000 $533,000 Current liabilities $ 65,000 $ 80,000 $ 70,000 Mortgage payable 80,000 85,000 50,000 Common shares 350,000 310,000 300,000 Retained earnings 145,000 125,000 113,000 $640,000 $600,000 $533,000 LAUER CORPORATION Income Statement For the Year Ended December 31 2021 2020 Sales revenue $750,000 $710,000 Less: Sales returns and allowances 40,000 50,000 Net sales 710,000 660,000 Cost of goods sold 420,000 400,000 Gross profit Operating expenses (including income taxes) 290,000 260,000 220,000 235,000 Profit $ 55,000 $ 40,000