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The following are comparative data for Sunshine State Equipment, Inc., for the 3-year period 2006-2008.
Income Statement Data
2008
2007
2006
Net sales
$1,400,000
$1,100,000
$1,220,000
Cost of goods sold
760,000
600,000
610,000
Gross profit on sales
$ 640,000
$ 500,000
$ 610,000
Selling, general, and other expenses
340,000
280,000
250,000
Income before taxes
$ 300,000
$ 220,000
$ 360,000
Income taxes
120,000
89,000
152,000
Net income
$ 180,000
$ 131,000
$ 208,000
Dividends paid
155,000
150,000
208,000
Net increase (decrease) in retained earnings
$ 25,000
$ (19,000)
$ 0
Balance Sheet Data
Assets
Cash
$ 50,000
$ 40,000
$ 75,000
Accounts receivable (net)
300,000
320,000
Inventory
380,000
420,000
350,000
Prepaid expenses
30,000
10,000
40,000
Land, buildings, and equipment (net)
690,000
Intangible assets
110,000
100,000
125,000
Other assets
70,000
20,000
$1,700,000
$1,500,000
$1,550,000
Liabilities and Stockholders' Equity
Accounts payable
$ 120,000
$ 185,000
Wages, interest, and dividends payable
25,000
Income tax payable
29,000
5,000
Miscellaneous current liabilities
4,000
8% bonds payable
Deferred revenues (long term)
No-par common stock, $10 stated value
500,000
400,000
Additional paid-in capital
510,000
Retained earnings
196,000
171,000
190,000
Instructions:
1. From the foregoing data, calculate financial ratios for the three years 2006-2008 as follows (for all ratios using balance sheet amounts, use the end-of-year balance):
(a) Return on equity
(b) Return on sales
(c) Asset turnover
(d) Assets-to-equity ratio
(e) Return on assets
(f) Current ratio
(g) Dividend payout ratio
2. Based on the ratios calculated in (1), evaluate Sunshine State Equipment, Inc., in 2008 as compared with 2007.
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