Reference no: EM131129421

The income statement of Minerals Plus, Inc. follows:

I. The income statement of Minerals Plus, Inc. follows:

Minerals Plus, Inc. Income Statement Year Ended September 30,2012
Revenues:
Service revenue		$235,000
Expenses:
Cost of goods sold	$97,000
Salary expense	$57,000
Depreciation expense	$26,000
Income tax expense	$4,000	$184,000
Net income		$51,000

Additional data follow:

a. Acquisition of plant assets is $118,000. Of this amount $100,000 is paid in cash and $18,000 by signing a note payable.
b. Cash receipts from sale of land totals $28,000. There was no gain or loss.
c. Cash receipts from issuance of common stock total $29,000.
d. Payment of note payable is $18,000.
e. Payment of dividends is $8,000.
f. From the balance sheet:

	Sept. 30
	2012	2011
Current Assets:
Cash	$30,00	$8,000
Accounts receivable	$41,000	$59,000
Inventory	$97,000	$93,000
Current Liabilities:
Accounts payable	$30,000	$17,000
Accrued liabilities	$11,000	$24,000

Compute DVD's net cash provided by (used for) operating activities during July. Use the indirect method.

1. Financial Statement Analysis

From Chapter 15, complete III and III and post the answers to the discussion board by day 3. Respond to at least two of your classmates' postings.

II. Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012. To answer this question, you gather the following data:

	2012	2011
Cash	$58,000	$57,000
Short-term investments	31,000
Net receivables	110,000	132,000
Inventory	247,000	297,000
Total assets	585,000	535,000
Total current liabilities	255,000	222,000
Long-term note payable	46,000	48,000
Income from operations	180,000	153,000
Interest expense	52,000	39,000

1. Compute the following ratios for 2012 and 2011:

a. Current ratio
b. Acid-test ratio
c. Debt to equity ratio

III. Using ratios to evaluate a stock investment

Comparative financial statement data of Danfield, Inc., follow:

Danfield, Inc. Comparative Income Statement Years Ended December 31, 2012 and 2011
	2012	2011
Net sales	$467,000	$428,000
Cost of goods sold	237,000	218,000
Gross profit	$230,000	$210,000
Operating expenses	136,000	134,000
Income from operations	$94,000	$76,000
Interest expense	9,000	10,000
Income before income tax	$85,000	$66,000
Income tax expense	24,000	27,000
Net income	$61,000	$39,000

Danfield, Inc. Comparative Income Statement Years Ended December 31, 2012 and 2011
	2012	2011	2010*
Current assets:
Cash	$97,000	$95,000
Current receivables, net	112,000	118,000	$102,000
Inventories	145,000	163,000	203,000
Prepaid expenses	12,000	5,000
Total current assets	$366,000	$381,000
Property, plant, and equipment, net	211,000	179,000
Total assets	577,000	$560,000	598,000
Total current liabilities	$225,000	$246,000
Long-term liabilities	114,000	97,000
Total liabilities	$339,000	$343,000
Preferred stock, 3%	108,000	108,000
Common stockholders' equity, no par	130,000	109,000
Total liabilities and stockholders' equity	$577,000	$560,000

* Selected 2010 amounts

1. Market price of Danfield's common stock: $86.58 at December 31, 2012 and $46.54 at December 31, 2011.

2. Common shares outstanding: 12,000 during 2012 and 10,000 during 2011 and 2010.

3. All sales on credit.

Requirements

1. Compute the following ratios for 2012 and 2011:

a. Current ratio
b. Times-interest-earned ratio
c. Inventory turnover
d. Gross profit percentage
e. Debt to equity ratio
f. Rate of return on common stockholders' equity
g. Earnings per share of common stock
h. Price/earnings ratio

2. Decide (a) whether Danfield's ability to pay debts and sell inventory improved or deteriorated during 2012 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.