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    Debt to total assets

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    Problem #5

    Condensed balance sheet and income statement data for Harold Legal Corporation appears below:

    Harold Legal CORPORATION
    Balance Sheet
    December 31
    2007 2006 2005
    Cash $25,000.00 $20,000.00 $18,000.00
    Receivables (net) 50,000 45,000 48,000
    Other current assets 90,000 95,000 64,000
    Investments 75,000 70,000 45,000
    Plant and equipment (net) 400,000 370,000 358,000
    $640,000 $600,000 $533,000
    Current liabilities $75,000 $80,000 $70,000
    Long-term debt 80,000 85,000 50,000
    Common stock, $10 par 340,000 310,000 300,000
    Retained Earnings 145,000 125,000 113,000
    $640,000 $600,000 $533,000

    Harold Legal CORPORATION
    Income Statement
    For the Year Ended December 31
    2007 2006
    Sales $740,000 $700,000
    Less: Sales returns and allowances 40,000 50,000
    Net sales 700,000 650,000
    Cost of goods sold 420,000 400,000
    Gross profit 280,000 250,000
    Operating expenses (including income taxes) 232,000 218,000
    Net income $48,000 $32,000

    Additional information:
    1. The market price of Legal's common stock was: $4.00 for 2005
    $5.00 for 2006
    $8.00 for 2007
    2. All dividends were paid in cash.

    Instructions:
    (a)(1) Compute the profit margin for 2006 and 2007.

    "2006
    Profit margin" Title = Amount = Formula
    Title Amount

    "2007
    Profit margin" Title = Amount = Formula
    Title Amount

    (a)(2) Compute the asset turnover for 2006 and 2007.

    "2006
    Asset turnover" Title = Amount = Formula time
    Title Amount

    "2007
    Asset turnover" Title = Amount = Formula time
    Title Amount

    (a)(3) Compute the earnings per share for 2006 and 2007. (Weighted average common shares in 2007 were 32,000 and in 2006
    were 31,000

    "2006
    Earnings per share" Title = Amount = Formula per share
    Title Amount

    "2007
    Earnings per share" Title = Amount = Formula per share
    Title Amount

    (a)(4) Compute the price-earnings ratio for 2006 and 2007.

    "2006
    Price-earnings ratio" Title = Amount = Formula times
    Title Amount

    "2007
    Price-earnings ratio" Title = Amount = Formula times
    Title Amount

    (a)(5) Compute the payout ratio for 2006 and 2007.

    "2006
    Payout ratio" Title = Amount = Formula
    Title Amount

    "2007
    Payout ratio" Title = Amount = Formula
    Title Amount

    (a)(6) Compute the debt to total assets for 2006 and 2007.

    "2006
    Debt to total assets" Title Amount = Formula
    Title Amount

    "2007
    Debt to total assets" Title Amount = Formula
    Title Amount

    (b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2006 to 2007 of Harold Legal Corporation.

    Enter text answer here.

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    https://brainmass.com/business/financial-statements/debt-to-total-assets-207213

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    Solution Preview

    Harold Legal CORPORATION
    Balance Sheet
    December 31
    2007 2006 2005
    Cash $25,000.00 $20,000.00 $18,000.00
    Receivables (net) 50,000 45,000 48,000
    Other current assets 90,000 95,000 64,000
    Investments 75,000 70,000 45,000
    Plant and equipment (net) 400,000 370,000 358,000
    $640,000 $600,000 $533,000
    Current liabilities $75,000 $80,000 $70,000
    Long-term debt 80,000 85,000 50,000
    Common stock, $10 par 340,000 310,000 300,000
    Retained Earnings 145,000 125,000 113,000
    $640,000 $600,000 $533,000

    Harold Legal CORPORATION
    Income Statement
    For the Year Ended December 31
    2007 2006
    Sales $740,000 $700,000
    Less: Sales returns and allowances 40,000 50,000
    Net sales 700,000 650,000
    Cost of goods sold 420,000 400,000
    Gross profit 280,000 250,000
    Operating expenses (including income taxes) 232,000 218,000
    Net income ...

    Solution Summary

    This provides the steps to compute debt to total assets ratios and other ratios

    $2.19

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