Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Comparative financial statement data of Lannister Inc
Comparative financial statement data of Lannister Inc. are as follows:
Lannister Inc.
Comparative Income Statement
Years Ended December 31, 2016 and 2015
2016 2015
Net sales $687,000 $595,000
Cost of goods sold 375,000 276,000
Gross profit 312,000 319,000
Operating expenses 129,000 142,000
Income from operations 183,000 177,000
Interest expense 37,000 45,000
Income before income tax 146,000 132,000
Income tax expense 36,000 51,000
Net income $110,000 $81,000
Lannister Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
2016 2015 2014
Current assets:
Cash $45,000 $49,000
Current receivables, net 212,000 158,000 $200,000
Inventories 297,000 281,000 181,000
Prepaid expenses 4,000 29,000
Total current assets 558,000 517,000
Property, plant and equipment, net 285,000 277,000
Total assets $843,000 $794,000 $700,000
Accounts payable 150,000 105,000 112,000
Other current liabilities 135,000 188,000
Total current liabilities $285,000 $293,000
Long-term liabilities 243,000 231,000
Total liabilities 528,000 524,000
Common shareholders' equity, no par315,000 270,000 199,000
Total liabilities and shareholders' equity$843,000 $794,000
Other information:
Market price of Lannister common stock: $102.17 at December 31, 2016; and $77.01 at December 31, 2015.
Common shares outstanding: 18,000 during 2016 and 17,500 during 2015.
All sales on credit.
Compute the following ratios for 2016 and 2015
Current ratio
Quick ratio (acid test)
Receivables turnover and days' sales outstanding (rounded to the nearest whole day)
Inventory turnover and days inventory outstanding (rounded to the nearest whole day)
Accounts payable turnover and days' payable outstanding (rounded to the nearest whole day).
Cash conversion cycle (in days)
Times-interest-earned ratio
Return on assets
Return on common shareholders' equity
Earnings per share of common stock
Price/earnings ratio.
Decide whether (a) Lannister's financial position improved or deteriorated during 2014 and (b) the investment attractiveness of Lannister's common stock appears to have increased or decreased.
Current ratio = Current assets / Current Liabilities
For 2016:
= 558,000 / 285,000
= 1.96
For 2015:
= 517,000 / 293,000
= 1.76
Quick ratio = Quick Assets / Current Liabilities
For 2016:
= (45000 + 212000 ) / 285,000
= 0.902
For 2015:
= ( 49000 + 158000 ) / 293000
= 0.706
Receivables turnover = Sales / Avg. Receivables
For 2016
= 687,000 / ( 212,000 + 158000 ) / 2
= 687000 / 185000
= 3.71
For 2015:
= 595,000 / ( 158000 + 200000 ) / 2
= 595000 / 179000
= 3.32
Days' Sales Outstanding = 365 / Receivables turnover
For 2016:
= 365 / 3.71
= 98.38 Days
For 2015:
= 365 / 3.32
= 109.94 Days
Inventory turnover = Cost of goods sold / Avg. Inventory
For 2016:
= 375,000 / ( 297,000 + 281000 ) / 2
= 375000 / 289000
= 1.30
For 2015:
= 276,000 / ( 281000 + 181,000 ) / 2
= 276000 / 231000
= 1.19
Days Inventory Outstanding = 365 / Inventory turnover
For 2016:
= 365 / 1.30
= 280.77 Days
For 2017:
= 365/ 1.19
= 306.72 Days
Accounts payable turnover = Cost of goods sold / Avg. Accounts Payables
For 2016:
= 375,000 / ( 150,000 + 105000 ) / 2
= 375000 / 127500
= 2.94
For 2015:
= 276,000 / ( 105000 + 112,000 ) / 2
= 276000 / 108500
= 2.54
Days' Payable Outstanding = 365 / Accounts payable turnover
For 2016:
= 365 / 2.94
= 124.15 Days
For 2015:
= 365 / 2.54
= 143.7 Days
Cash conversion cycle = Days Inventory Outstanding + Days' Sales Outstanding - Days' Payable Outstanding
For 2016:
= 280.77 + 98.38 - 124.15
= 255 Days
For 2015:
= 306.72 + 109.94 - 143.7
= 272.96 Days
Times-interest-earned = Income from operations / Interest expense
For 2016:
= 183,000 / 37000
= 4.95
For 2015:
= 177,000 / 45000
= 3.93
Return on assets = Net Income / Avg. Total assets
For 2016:
= 110,000 / ( 843,000 + 794000 ) / 2
= 110000 / 818500
= 13.44%
For 2015:
= 81000 / ( 794000 + 700000 ) / 2
= 81000 / 747000
= 10.84%
Return on common shareholders' equity = Net Income / Avg. Total common shareholders' equity
For 2016:
= 110000 / ( 315,000 + 270000 ) / 2
= 110000 / 292500
= 37.61%
For 2015:
= 81000 / ( 270000 + 199000 ) / 2
= 81000 / 234500
= 34.54%
Earnings per share of common stock = Net Income / Common shares outstanding
For 2016:
= 110000 / 18000
= $6.11
For 2015:
= 81000 / 17500
= $4.63
Price/earnings ratio. = Market Price / Earnings per share
For 2016:
= 102.17 / 6.11
= 16.72
For 2015:
= 77.01 / 4.63
= 16.63
a.) Lannister's financial position has improved in 2016
b.) The investment attractiveness have increased .
