Winter Corporation has just completed its comparative statements for the year ended December 31, 2012. At this point, certain analytical
Winter Corporation has just completed its comparative statements for the year ended December 31, 2012. At this point, certain analytical and interpretive procedures are to be undertaken. The completed statements (summarized) are as follows:
*Credit sales totaled 40 percent.
**$20,000 of bonds were issued on 1/2/2012. Assume the tax rate is 30%.
â€ The market price of the stock at the end of 2012 was $18 per share.
â€¡During 2012, the company declared and paid a cash dividend of $9,000.
1. Compute appropriate ratios for 2012 and explain the meaning of each.
2. Respond to the following for 2012:
a. Evaluate the financial leverage. Explain its meaning using the computed amount(s).
b. Evaluate the profit margin amount and explain how a stockholder might use it.
c. Explain to a stockholder why the current ratio and the quick ratio are different. Do you observe any liquidity problems? Explain.
d. Assuming that credit terms are 1/10, n/30, do you perceive an unfavorable situation for the company related to credit sales?Explain.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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