Reference no: EM132964986

Comparative financial statement data for Arthur Corporation and Lancelot Corporation, two competitors, appear below. All balance sheet data are as of December 31, 2017.

                                                 Arthur Corporation                  Lancelot Corporation
                                                             2017                                          2017

Net sales                               $1,850,000                             $620,000
Cost of goods sold                   1,225,000                               365,000
Operating expenses                  303,000                                    98,000
Interest expense                          9,000                                3,800
Income tax expense                    85,000                               36,800
Current assets                          427,200                            130,336
Plant assets (net)                     532,000                           139,728
Current liabilities                        66,325                            35,348
Long-term liabilities                    148,500                             29,620

Additional Information:

Cash from operating activities         $153,000                       $44,000
Capital expenditures                      $90,000                       $20,000
Dividends paid                                $36,000                         $15,000
Average number of shares outstanding 100,000                             50,000

Instructions

Problem (a) Comment on the relative profitability of the companies by computing the net income and earnings per share for each company for 2017.

Problem (b) Comment on the relative solvency of the companies by computing the debt to assets ratio and the free cash flow for each company for 2017.