The question is about ratio analysis finding out liquidity

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Reference no: EM13356637

The question is about ratio analysis finding out liquidity and solvency of the company.

Comparative financial statement data for Arthur Corporation and Lancelot Corporation, two competitors, appear below. All balance sheet data are as of December 31, 2007.

	Arthur Corporation	Lancelot Corporation
	2007	2007
Net sales	$1,950,000	$620,000
Cost of goods sold	1,175,000	340,000
Operating expenses	303,000	98,000
Interest expense	9,000	3,800
Income tax expense	85,000	36,000
Current assets	427,200	190,336
Plant assets (net)	532,000	139,728
Current liabilities	66,325	35,348
Long-term liabilities	108,500	29,620
Additional information:
Cash from operating activities	$148,000	$36,000
Capital expenditures	$90,000	$20,000
Dividends paid	$36,000	$15,000
Average number of shares outstanding	100,000	50,000

Instructions
a) Comment on the relative profitability of the companies by computing the net income and earnings per share for each company for 2007.
b) Comment on the relative liquidity of the companies by computing working capital and the current ratios for each company for 2007.
c) Comment on the relative solvency of the companies by computing the debt to total assets ratio and the free cash flow for each company for 2007.

Reference no: EM13356637

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