P10-6A. Calculate and analyze financial ratios. (LO 3)
The following information was taken from the 2008 annual report of Presentations
| At December 31, (in thousands) | ||
| 2008 | 2007 | |
| ASSETS | ||
| Current assets | ||
| Cash | $1,617 | $1,220 |
| Accounts receivable | 1,925 | 3,112 |
| Merchandise inventory | 2,070 | 966 |
| Prepaid expenses | 188 | 149 |
| Total current assets | 5,800 | 5,447 |
| Plant and equipment: | ||
| Buildings net | $4457 | $2,992 |
| Equipment net | 1,293 | 1,045 |
| Total plant and equipment | $5,750 | $4,037 |
| Total assets | $11,550 | $9,484 |
| LIABILITIES | ||
| Current liabilities | ||
| Accounts payable | $ 1817 | $ 1,685 |
| Notes payable | 900 | 1,100 |
| Total current liabilities | 2,717 | 2,785 |
| Long- term liabilities | 3,500 | 2,000 |
| Total liabilities | 6,217 | 4,795 |
| STOCKHOLDERESQ’ UITY | ||
| Common stock, no par value | 3,390 | 3,042 |
| Retained earnings | 1,943 | 1,657 |
| Total stockholder’s equity | 5,333 | 4,699 |
| Total liabilities and stockholder’s equity | $11,550 | 59,484 |
| Sales revenue | $12,228 | |
| Cost of goods sold | 8,751 | |
| Gross profit on sales | 3,477 | |
| Operating expenses: | ||
| Depreciation-buildings and equipment | 102 | |
| Other selling and administrative | 2,667 | |
| Total expenses | 2,769 | |
| Income before interest and taxes | 708 | |
| Interest expense | 168 | |
| Income before taxes | 540 | |
| Income taxes | 114 | |
| Net income | $426 |
Required
a. Calculate the following ratios for 2008 and 2007 whenever possible.
1. Debt-to-equity ratio
2. Gross margin percentage
3. Current ratio
4. Acid-test ratio
5. Times-interest-earned ratio
b. What do the ratios indicate about the success of Presentations? What additional information would help you analyze the overall performance of this company?
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