Learning objective 4 P17-27A Using ratios to evaluate a stock investment Comparative financial statement data of Sanfield, Inc. follow: 1, 2018: e. 48.9% SANFIELD, INC Comparative Income Statement Years Ended December 31, 2018 and 2017 SANFIELD, INC Comparative Balance Sheet December 31, 2018 and 2017 2018 2017 2018 2017 2016* Net Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Interest Expense Income Before Income Tax Income Tax Expense Net Income 462,000 $ 430,000 236,000 213,000 226,000 217,000 135,000 133,000 91,000 84,000 12,000 72,000 18,000 22,000 S 65,000 50,000 Assets Current Assets: Cash Accounts Receivable, Net Merchandise Inventory Prepaid Expenses Total Current Assets $ 99,000 109,000 142,000 15,000 365,000 215,000 97,000 117,000 100,000 164,000 207,000 a. 5,000 383,000 177,000 8,000 83,000 Property, Plant, and Equipment, Net Total Assets $ 580,000 560,000 599,000 Liabilities Total Current Liabilities Long-term Liabilities Total Liabilities s 222,000 244,000 92,000 335,000 336,000 113,000 Stockholders' Equity Preferred Stock, 4% Common Stockholders' Equity, no par Total Liabilities and Stockholders' Equity 92,000 153,000 $ 580,000 92,000 132,000 $ 560,000 85,000 * Selected 2016 amounts 1. Market price of Sanfield's common stock: $51.48 at December 31, 2018, and $37.08 at December 31, 2017 2. Common shares outstanding: 16,000 on December 31, 2018 and 15,000 on Decem- ber 31, 2017 and 2016. 3. All sales are on credit. Requirements 1. Compute the following ratios for 2018 and 2017 f. Debt to equity ratico a. Current ratio b. Cash ratio c. Times-interest-earned ratio d. Inventory turnover g- Rate of return on common h. Earnings per share of common stock i. Price/earnings ratio e. Gross profit percentage P1l-27A Requirements 1 Compute the following ratios for 2018 and 2017: a. Current ratio b. Cash ratio c. Times-interest-earnedratio d. Inventory turnover e. Gross profit percentage f. Debt to equity ratio g. Rate of return on common stockholders'equity h. Earnings per share of common stock i. Pricelearnings ratio 2. Decide (a)whether Sanfield's abilty to pay debts andto sell inventory improved or deteriorated during 2018 and lb) whether the investment attractiveness of its common stock appears to have Solution: Requirement 1 b. d. Requirement 2 Page 2