Star Industries Inc comparative financial statements for theyears ending December 31, 2010 and 2009, are as follows. The marketprice for Star Industries common stock was $ 20 on December 31,2009, and $ 32 on December 31, 2010. Common stockshares outstanding for both 2010 and 2009 are 70000 shares (Ie $700,000 / $ 10 par)
Star Industries
Comparative Income Statement
For the Years Ended December 31, 2010 and 2009
2010
2009
Sales
$7,000,000
$5,670,000
Sales returns and allowances
$325,000
$175,000
Net Sales
$6,675,000
$5,495,000
Cost of Goods Sold
$4,850,000
$3,950,000
Gross Profit
$1,825,000
$1,545,000
Selling Expenses
$780,000
$464,000
Administrative Expenses
$485,000
$423,000
Total Operating Expenses
$1,465,000
$887,000
Income From Operations
$360,000
$658,000
Other Income
$25,000
$19,200
Earnings before Interest & taxes (EBIT)
$385,000
$677,200
Other Expenses (interest)
$105,000
$64,000
Income Before Income Tax
$280,000
$613,200
Income Tax Expense
$35,000
$176,000
Net Income
$245,000
$437,200
`
Star Industries
Comparative Retained Earnings Statement
For the Years Ended December 31, 2010 and 2009
2010
2009
Retained Earnings, Januray 1
$ 723,000
$ 355,800
Add Net Income for year
$245,000
$437,200
Total
$ 968,000
$ 793,000
Deduct dividends:
Preferred Stock
$ 40,000
$ 40,000
Common Stock
$ 45,000
$ 30,000
Total
$ 85,000
$ 70,000
Retained Earnings, December 31
$883,000
$ 723,000
Star Industries
Comparative Balance Statement
December 31, 2010 and 2009
12-31-2010
12-31-2009
Assets
Current Assets
Cash
$235,000
$215,000
Temporary Investments
$10,000
$50,000
Accounts Receivable(Net)
$525,000
$425,000
Inventories
$940,000
$580,000
Prepaid Expenses
$30,000
$20,000
Total Current Assets
$1,740,000
$1,290,000
Long-Term Investments
$165,000
$135,000
Property, Plant and Equipment (Net)
$2,525,000
$1,878,000
Total Assets
$4,430,000
$3,303,000
Liabilities
Current Liabilities
$950,000
$780,000
Long-Term Liabilities
Mortgage Note Payable 8%(due 2013)
$410,000
$0
Bonds Payable, 7% (due2016)
$1,200,000
$800,000
Total Long Term Liabilities
$1,610,000
$800,000
Total Liabilities
$2,560,000
$1,580,000
Stockholders' Equity
Preferred 8% stock, $ 100 Par
$300,000
$300,000
Common Stock, $ 10 Par
$700,000
$700,000
Retained Earnings
$883,000
$723,000
Total Stockholders' Equity
$1,883,000
$1,723,000
Total Liabilities and Stockholders' Equity
$4,443,000
$3,303,000
Determine the following measures for 2010: Compare withindustry norms and comment:
Ratios
Industry Norm
1. Working Capital
N/A
2. Current Ratio
2.2
3. Quick Ratio
0.8
4. Accounts Receivable Turnover
16.0
5. Number of days sales in receivables
22.2
6. Inventory Turnover
5.0
7. Number of days sales in inventory
75.0
8. Ratio of fixed assets to long-term liabilites
2.0
9. Ratio of liabilities to stockkholders equity
0.7
10. Number of times interest charges are earned
8.5
11. Number of times preferred dividends earned
7.1
12. Ratio of net sales to assets
2.1
13. Rate earned on total assets
8.5%
14. Rate earned on stockholders' equity
12.0%
15. Rate earned on common stockholders' equity
14.2%
16. Earnings per share on common stock
$3.65
17. Price-earnings ratio
9.2
18. Dividends per share
$0.80
19. Dividend yield
2.50%
Thanks!
Star Industries Inc comparative financial statements for theyears ending December 31, 2010 and 2009, are as follows. The marketprice for Star Industries common stock was $ 20 on December 31,2009, and $ 32 on December 31, 2010. Common stockshares outstanding for both 2010 and 2009 are 70000 shares (Ie $700,000 / $ 10 par)
Star Industries
Comparative Income Statement
For the Years Ended December 31, 2010 and 2009
2010 | 2009 | ||
Sales | $7,000,000 | $5,670,000 | |
Sales returns and allowances | $325,000 | $175,000 | |
Net Sales | $6,675,000 | $5,495,000 | |
Cost of Goods Sold | $4,850,000 | $3,950,000 | |
Gross Profit | $1,825,000 | $1,545,000 | |
Selling Expenses | $780,000 | $464,000 | |
Administrative Expenses | $485,000 | $423,000 | |
Total Operating Expenses | $1,465,000 | $887,000 | |
Income From Operations | $360,000 | $658,000 | |
Other Income | $25,000 | $19,200 | |
Earnings before Interest & taxes (EBIT) | $385,000 | $677,200 | |
Other Expenses (interest) | $105,000 | $64,000 | |
Income Before Income Tax | $280,000 | $613,200 | |
Income Tax Expense | $35,000 | $176,000 | |
Net Income | $245,000 | $437,200 |
`
Star Industries
Comparative Retained Earnings Statement
For the Years Ended December 31, 2010 and 2009
2010 | 2009 | ||
Retained Earnings, Januray 1 | $ 723,000 | $ 355,800 | |
Add Net Income for year | $245,000 | $437,200 | |
Total | $ 968,000 | $ 793,000 | |
Deduct dividends: | |||
Preferred Stock | $ 40,000 | $ 40,000 | |
Common Stock | $ 45,000 | $ 30,000 | |
Total | $ 85,000 | $ 70,000 | |
Retained Earnings, December 31 | $883,000 | $ 723,000 |
Star Industries
Comparative Balance Statement
December 31, 2010 and 2009
12-31-2010 | 12-31-2009 | ||||
Assets | |||||
Current Assets | |||||
Cash | $235,000 | $215,000 | |||
Temporary Investments | $10,000 | $50,000 | |||
Accounts Receivable(Net) | $525,000 | $425,000 | |||
Inventories | $940,000 | $580,000 | |||
Prepaid Expenses | $30,000 | $20,000 | |||
Total Current Assets | $1,740,000 | $1,290,000 | |||
Long-Term Investments | $165,000 | $135,000 | |||
Property, Plant and Equipment (Net) | $2,525,000 | $1,878,000 | |||
Total Assets | $4,430,000 | $3,303,000 | |||
Liabilities | |||||
Current Liabilities | $950,000 | $780,000 | |||
Long-Term Liabilities | |||||
Mortgage Note Payable 8%(due 2013) | $410,000 | $0 | |||
Bonds Payable, 7% (due2016) | $1,200,000 | $800,000 | |||
Total Long Term Liabilities | $1,610,000 | $800,000 | |||
Total Liabilities | $2,560,000 | $1,580,000 | |||
Stockholders' Equity | |||||
Preferred 8% stock, $ 100 Par | $300,000 | $300,000 | |||
Common Stock, $ 10 Par | $700,000 | $700,000 | |||
Retained Earnings | $883,000 | $723,000 | |||
Total Stockholders' Equity | $1,883,000 | $1,723,000 | |||
Total Liabilities and Stockholders' Equity | $4,443,000 | $3,303,000 | |||
Determine the following measures for 2010: Compare withindustry norms and comment:
Ratios | Industry Norm | ||||
1. Working Capital | N/A | ||||
2. Current Ratio | 2.2 | ||||
3. Quick Ratio | 0.8 | ||||
4. Accounts Receivable Turnover | 16.0 | ||||
5. Number of days sales in receivables | 22.2 | ||||
6. Inventory Turnover | 5.0 | ||||
7. Number of days sales in inventory | 75.0 | ||||
8. Ratio of fixed assets to long-term liabilites | 2.0 | ||||
9. Ratio of liabilities to stockkholders equity | 0.7 | ||||
10. Number of times interest charges are earned | 8.5 | ||||
11. Number of times preferred dividends earned | 7.1 | ||||
12. Ratio of net sales to assets | 2.1 | ||||
13. Rate earned on total assets | 8.5% | ||||
14. Rate earned on stockholders' equity | 12.0% | ||||
15. Rate earned on common stockholders' equity | 14.2% | ||||
16. Earnings per share on common stock | $3.65 | ||||
17. Price-earnings ratio | 9.2 | ||||
18. Dividends per share | $0.80 | ||||
19. Dividend yield | 2.50% | ||||
Thanks!
