Shera Company just completed its second year of operations. The comparative income statements for these years are as follows:

20X1 20X2 Sales revenue $500,000 $800,000 Cost of goods sold 300,000 464,000 Gross margin $200,000 $336,000 Operating expenses 80,000 164,000 Interest expenses 20,000 20,000 Income before taxes $100,000 $152,000 Income taxes 34,000 51,680 Net income $ 66,000 $100,320 Selected information from the balance sheet for 20X1 is also given.

Current assets $100,000 Long-term assets 400,000 Total assets $500,000 Current liabilities $ 80,000 Long-term liabilities 220,000 Total liabilities $300,000 Common stock $100,000 Retained earnings 100,000 Total equity $200,000 Shera had 100,000 shares of stock outstanding. At the end of 20X2, a share had a market value of

$1.80. The shares outstanding have not changed since the original issue. Dividends of $30,000 were paid in 20X2. Total assets have not changed during 20X2.

Required:

1. Using 20X1 as a base period, express all line items of the income statements as a percentage of the corresponding base period item.

2. Express each line item of the two income statements as a percentage of sales.

3. Comment on the trends revealed by the computations in Requirements 1 and 2.

4. Compute the following ratios for 20X2:

(a) current ratio,

(b) debt ratio,

(c) return on total assets,

(d) times-interest-earned ratio,

(e) earnings per share, and (f ) dividend yield.