Chapter Two - Wiley

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90 CHAPTER 2 A Further Look at Financial Statements
Liabilities and Stockholders’ Equity 2005 2004 2003
Current liabilities $ 98,000 $ 75,000 $ 70,000
Long-term debt 97,000 70,000 65,000
Common stock 400,000 340,000 300,000
Retained earnings 249,000 164,000 39,000
Total liabilities and stockholders’ equity $844,000 $649,000 $474,000
VON MISES CORPORATION
Income Statements
For the Years Ended December 31
2005 2004
Sales $705,000 $800,000
Cost of goods sold 420,000 400,000
Operating expenses (including income taxes) 200,000 237,000
Net income $ 85,000 $163,000
Additional information: The average number of shares outstanding was 370,000 in 2005
and 320,000 in 2004. The stock price at December 31, 2005, was $4 and at December 31,
2004, was $10.
Instructions
Compute these values and ratios for 2004 and 2005.
(a) Earnings per share.
(b) Price-earnings ratio.
(c) Working capital.
(d) Current ratio.
(e) Debt to total assets ratio.
(f) Based on the ratios calculated, discuss briefly the improvement or lack thereof in
the financial position and operating results of Von Mises from 2004 to 2005.
Compute ratios and compare
liquidity, solvency, and profitability
for two companies.
(SO 5, 7)
P2-8A Selected financial data (in millions) of two competitors, Bethlehem Steel and
United States Steel, in 2001 are presented here.
Bethlehem Steel United States Steel
Corporation
Corporation
Income Statement Data for Year
Net sales $ 3,334 $6,375
Cost of goods sold 3,469 6,091
Selling and administrative expense 360 436
Interest expense 91 141
Other income (loss) 380 253
Income tax expense (refund) 984 (328)
Net income $(1,950) $ (218)