Ratios from Comparative and Common-Size Data

Consider the following financial statements for Vega Company. During the year, management obtained additional bond financing to enlarge its production facilities. The plant addition produced a new high-margin product, which is supposed to improve the average rate of gross profit and return on sales.

As a potential investor, you decide to analyze the financial statements:

Ratios from Comparative and Common-Size Data Consider the following financial statements for Vega Company. During the year, management obtained additional bond financing to enlarge its production facilities. The plant addition produced a new high-margin product, which is supposed to improve the average rate of gross profit and return on sales. As a potential investor, you decide to analyze the financial statements: VEGA COMPANY Balance Sheets (Thousands of Dollars) Dec. 31, 2013 Dec. 31, 2012 Assets Cash $21,000 $16,100 Accounts receivable (net) 39,000 21,400 Inventory 105,000 72,000 Prepaid expenses 1,500 3,000 427,500 463,500 Plant and other assets (net) $540,000 $630,000 Total Assets Liabilities and Stockholders' Equity Current liabilities $77,000 $46,000 9% Bonds payable 88,500 151,000 8% Preferred stock, S50 Par Value 61,000 61,000 Common stock, $10 Par Value 226,000 226,000 82,500 61,000 Retained earnings $630,000 $540,000 Total Liabilities and Stockholders' Equity VEGA COMPANY Income Statements IThousands of Dollars) 2013 2012 Sales revenue $841,000 $698,500 553,000 475,000 Cost of goods sold Gross profit on sales 288,000 223,500 231,000 174,000 Selling and administrative expenses Income before interest expense and income taxes 57,000 49,500 17,800 14,500 nterest expense Income before income taxes 40,200 36,000 15,100 13,600 Income tax expense $26,100 $23,400 Net income Other financial data (thousands of dollars) Cash provided by operating activities $30,000 $25,000 Preferred stock dividends 4,800 4,800