Problem 2 (88 points) You have just been hired as a financial analyst for Moselle Company. Your boss has asked you to perform a comprehensive analysis of the company's financial statements, including comparing Moselle's performance to its major competitors. The company has provided the following data: Balance Sheet December 31, Year 2 and Year 1 Year 1 Assets Year 2 Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net 200,000 260,000 120,000 20,000 600,000 730,000 $ 1,330,000 252,000 255,000 133,000 18,000 658,000 681,000 $ 1,339,000 mir Domusch Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Bonds payable Total liabilities Stockholders' equity: Common stock, $4 par value Additional paid-in capital Retained earnings Total stockholders' equity Total liabilities & stockholders' equity 177,000 25,000 39,000 241,000 200,000 441,000 190,000 30,000 40,000 260,000 200,000 460,000 240,000 80,000 550,000 870,000 $ 1,330,000 240,000 80,000 578,000 898,000 $ 1,339,000 Income Statement For the Year Ended December 31, Year 2 1,400,000 900,000 500,000 436,462 63,538 14,000 49,538 17,338 Sales (all on account) Cost of goods sold Gross margin Operating expenses Net operating income Interest expense Net income before taxes Income taxes (35%) 32,200 Net income Dividends on common stock during Year 2 totaled $4,200. The market price of common stock at the end of Year 2 was $9.72 per share. www.euruni edu To begin your assignment, you gather the following financial data and ratios that are typical of companies in Moselle Company's industry: 2.3 Current ratio Acid-test ratio 40 days Average collection period Average sale period 40 days Return on assets 5.50% Debt-to-equity ratio 0.55 Times interest earned ratio 4.2 Price-earnings ratio 20 Instructions: A. You decide first to assess the company's performance in terms of debt management and profitability. Compute the following for this year: a. The times interest earned ratio (or interest coverage ratio). (4 points) b. The debt-to-equity ratio. (4 points) c. The gross margin percentage. (4 points) d. The return on total assets. (4 points) e. The return on equity. (4 points) B. You decide next to assess the company's stock market performance. Compute the following for this year: a. The earnings per share. (4 points) b. The dividend yield ratio. (4 points) c. The dividend payout ratio. (4 points) d. The price-earnings ratio. How do investors regard Moselle Company as compared to other companies in the industry? Explain. (5 points)