The financial statements for Armstrong and Blair companies are summarized here:

	Armstrong Company	Blair Company
Balance Sheet
Cash	$ 45,000	$ 32,000
Accounts Receivable, Net	50,000	40,000
Inventory	120,000	60,000
Equipment, Net	200,000	320,000
Other Assets	55,000	418,000
Total Assets	$ 470,000	$ 870,000
Current Liabilities	$ 120,000	$ 70,000
Notes Payable (long-term)	80,000	390,000
Total Liabilities	200,000	460,000
Common Stock (par $10)	160,000	210,000
Additional Paid-in Capital	40,000	120,000
Retained Earnings	70,000	80,000
Total Liabilities and Stockholders’ Equity	$ 470,000	$ 870,000
Income Statement
Sales Revenue	$ 480,000	$ 840,000
Cost of Goods Sold	255,000	415,000
Other Expenses	170,000	325,000
Net Income	$ 55,000	$ 100,000
Other Data
Estimated value of each share at end of year	$ 19	$ 26
Selected Data from Previous Year
Accounts Receivable, Net	$ 30,000	$ 48,000
Inventory	102,000	55,000
Equipment, Net	200,000	320,000
Notes Payable (long-term)	80,000	80,000
Total Stockholders’ Equity	241,000	450,000

The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years and each has had steady growth. Despite these similarities, the management of each has a different viewpoint in many respects. Blair is more conservative, and as its president said, “We avoid what we consider to be undue risk.” Both companies use straight-line depreciation, but Blair estimates slightly shorter useful lives than Armstrong. No shares were issued in the current year and neither company is publicly held. Blair Company has an annual audit by a CPA, but Armstrong Company does not. Assume the end-of-year total assets and net equipment balances approximate the year’s average and all sales are on account.

Required:

1. Calculate the following ratios. TIP: To calculate EPS, use the balance in Common Stock to determine the number of shares outstanding. Common Stock equals the par value per share times the number of shares. (Use 365 days in a year. Do not round intermediate calculations and round your final answers to 2 decimal places.)

 

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Armstrong Company Blair Ratio Company Tests of Profitability: 1. Net Profit Margin % % 2. Gross Profit Percentage 3. Fixed Asset Turnover % % 4. Return on Equity % % 5. Earnings per Share 6. Price/Earnings Ratio Tests of Liquidity: 7. Receivables Turnover 7. Days to Collect 8. Inventory Turnover 8. Days to Sel 9. Current Ratio Tests of Solvency: 10. Debt-to-Assets Armstrong Company Blair Ratio Company Tests of Profitability: 1. Net Profit Margin % % 2. Gross Profit Percentage 3. Fixed Asset Turnover % % 4. Return on Equity % % 5. Earnings per Share 6. Price/Earnings Ratio Tests of Liquidity: 7. Receivables Turnover 7. Days to Collect 8. Inventory Turnover 8. Days to Sel 9. Current Ratio Tests of Solvency: 10. Debt-to-Assets

Answer rating: 100% (QA)

Ratio Armstrong Company Blair Company 1Net profit marginNet profitSales100 55000480000100 1146 10000... View the full answer