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Alley Company: compute various financial ratios

Alley Company
Comparative balance sheet December 31, 2009

Assets 2009 2008
Cash $35,000 $40,000
Marketable securities 15,000 60,000
Accounts receivable (net) 40,000 30,000
Inventory 50,000 70,000
Property, plant andequipment (net) 260,000 300,000
Total assets $400,000 $500,000

Liabilities and stockholders equity
Accounts payable $20,000 $30,00
Short term notes payable 30,000 90,000
Bnds payable 90,000 160,000
Common stock 150,000 150,000
Retained earnings 110,000 70,000
Total liabilities and stockholders' equity $400,00 $500,000

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Alley Company
Income statement
for the year ended December 31, 2009

Net sales $400,000
Cost of goods sold 240,000
Gross profit 160,000
Expenses
Interest expense $18,000
Selling expenses 28,000
Administrative expenses 24,000
Total expenses 70,000
Income before income taxes 90,000
Income tax expense 27,000
Net income $63,000

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Additional information:

a) cash dividends of $23,000 were declared and paid in 2009

b) weighted average number of shares of common stock outstanding during 2009 was 30,000 shares

c) market value of common stock on December 31, 2009, was $21 per share

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QUESTIONS:

Using the financial statement and additional information, compute at least five of the following ratios for Alley Company for 2009. Show all computations.

1) Current ratio_________

2) Return on common stockholders equity_________

3) Price earnings ratio_____________

4) Acid-test ratio_________________

5) Number of days sales in accounts receivable______________

6) Times interest earned________________

7) Return on sales_____________

8)Return on assest____________________

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ANSWERS
Please see attached file for answers.

Formula Answer
Cash + marketable securities + accounts receivable + inventory 35000+15000+40000+50000 2.8
Accounts payable short term ...

Solution Summary

The expert computes various financial ratios for Alley Company.

$2.19