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Financial Statement Analysis Problem

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Marva Rossen, who just two years ago was appointed president of Hedrick Company, admits that the company has been "inconsistent" in its performance over the past several years. But Rossen argues that the company has its costs under control and is now experiencing strong sales growth, as evidenced by the more than 24% increase in sales over the last year. Rossen also argues that investors have recognized the improving situation at Hedrick Company, as shown by the jump in the price of its common stock from $38 per share last year to $54 per share this year. Rossen believes that with strong leadership and with the modernized equipment that the $1,000,000 loan will enable the company to buy, profits will be even stronger in the future.

Anxious to impress your supervisor, you decide to generate all the information you can about the company. You determine that the following ratios are typical of companies in Hedrick's industry:

(Please see the attachment.)

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Solution Summary

Solution contains calculations for the following ratios: earnings per share, dividend yield ratio, dividend payout ratio, price-earnings ratio, book value per share, gross margin percentage, working capital, current ratio, acid-test ratio, average collection period, average sales period, debt-to-equity ratio, and times interest earned.