Name:

Exercise: Problem P13-3A

Course:
Accounting and Finance: Managerial Use and Analysis
Date:
P13-3A
Condensed balance sheet and income statement data for Here and There Corporation are presented
here.
HERE AND THERE CORPORATION
Balance Sheets
December 31
2007
2006
$30,0
$20,0
Cash
00
00
50,00
45,00
Receivables (net)
0
0
90,00
85,00
Other current assets
0
0
55,00
70,00
Investments
0
0
500,0
370,0
Plant and equipment (net)
00
00
$725,
$590,
000
000

Current liabilities
Long-term debt
Common stock, $10 par
Retained earnings

$85,0
00
185,0
00
320,0
00
135,0
00
$725,
000

$80,0
00
85,00
0
300,0
00
125,0
00
$590,
000

HERE AND THERE CORPORATION

Income Statement
For the Years Ended December 31
2007
$640,
Sales
000
40,00
Less: Sales returns and allowances
0
600,0
Net sales
00
Cost of goods sold
425,0
00

2005
$18,000
48,000
64,000
45,000
258,000
$433,000

$30,000
20,000
300,000
83,000
$433,000

2006
$500,000
30,000
470,000
300,000

Gross profit
Operating expenses (Including income taxes)

175,0
00
117,0
00
$58,0
00

Additional information:
1. The market price of Here and Theres common stock
was
$6
$9
2007, respectively.
2. You must compute dividends paid. All dividends were paid in cash.
Instructions:
(a) (1) Compute the profit margin ratio for 2006 and 2007.
2007
$58,000

170,000
94,000
$76,000

$7

2006
$76,0
00
$470,
000

9.666
67

$600,000

16.170
213

(a) (2) Compute the gross profit ratio for 2006 and 2007.
2007
$175,000

2006
$170,
000
$470,
000

29.16
67

$600,000

36.170
213

0.91

Times

0.92

Times

$1.87

Per
share

(a) (3) Compute the asset turnover ratio for 2006 and 2007.
2007
$600,000
$725,
+
$590,
000
000
2
2006
$470,000
$590,
+
$433,
000
000
2

(a) (4) Compute the earnings per share ratio for 2006 and 2007.
2007
$58,000
$32,0
+
00
2

$30,0
00

for 2005,
2006, and

2006
$76,000
$30,000

$2.53

Per
share

(a) (5) Compute the price-earnings ratio for 2006 and 2007.
2007
$7.00
$1.87

2006
3.7

Time
s

$9.00
$2.53

3.6

Times

(a) (6) Compute the payout ratio for 2006 and 2007.
2007
$2
$2

2006
98%

$3
$3

107%

(a) (7) Compute the debt to total assets ratio for 2006 and 2007.
2007
$270,000
$725,000

2006
37%

$165,
000
$590,
000

28%

(b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in the financial
position and operating results from 2006 to 2007 of Here and There Corporation.
Enter text answer here. The performance in 2007 is not as good as the performance in 2006. There is a
decrease in the ratio values which indicate that the performance of 2006 is better than 2007.