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Financial statement analysis for James Company

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The condensed financial statements of James Company for the years 2007-2008 are presented below:

James Company

Comparative Balance Sheets

As of December 31, 2008 and 2007
2008 2007

Cash $ 420,000 $ 120,000

Receivables (net) 460,000 300,000

Inventories 380,000 340,000

Plant and equipment 1,700,000 1,112,000

Accumulated depreciation (260,000) (192,000)

$2,700,000 $1,680,000

Accounts payable $ 240,000 $ 160,000

Dividends payable -0- 40,000

Bonds payable 400,000 -0-

Common stock ($10 par) 1,520,000 1,200,000

Retained earnings 540,000 280,000

$2,700,000 $1,680,000

Additional data:

Market value of stock at 12/31/08 is $80 per share.

James sold 32,000 shares of common stock at par on July 1, 2008.

James Company

Condensed Income Statement

For the Year Ended December 31, 2008

Sales $2,400,000

Cost of goods sold 1,600,000

Gross profit 800,000

Administrative and selling expense 500,000

Net income $ 300,000

Instructions

Compute the following financial ratios by placing the proper amounts in the parentheses provided for numerators and denominators. Fill in the numerator and denominator only; do not compute the ratios.

a. Current ratio at 12/31/08 ( )

( )

b. Acid test ratio at 12/31/08 ( )

( )

c. Receivables turnover in 2008 ( )

( )

d. Inventory turnover in 2008 ( )

( )

e. Profit margin on sales in 2008 ( )

( )

f. Earnings per share in 2008 ( )

( )

g. Rate of return on common stock equity in 2008 ( )

( )

h. Price earnings ratio at 12/31/08 ( )

( )

i. Debt to total assets at 12/31/08 ( )

( )

j. Book value per share at 12/31/08 ( )

( )

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Solution Summary

The solution examines financial statement analysis for James Company. The comparative balance sheets are analyzed.

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