Condensed balance sheet and income statement data for Landwehr Corporation appear below.
Additional Information
- The market price of Landwehr's common stock was $4.00, $5,00, and $8,00 for 2018, 2019, and 2020, respectively.
- All Dividends wer paid in cash
Instructions
- Compute the following ratios for 2019, and 2020.
- Profit margin.
- Asset turnover.
- Earnings per share (Weighted average common shares in 2020 were 32,000 and in 2019 were 31,000.)
- Price-earning ratio.
- Payout ratio..
- Debt to assets ratio.
- Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2019 to 2018 of Landwehr Corporation.
Solution
a.
b.
Profit margin and Earnings per share have both increased so that profitability of the corporation appears to have improved. Price earnings ratio is also increased, it suggests that investors looking more favorably at the corporation. In addition, Payout Ratio and Debt to assets ratio have decreased, which should help the solvency of the corporation.