Description
Write a 700- to 1,050-word Executive Summary using your solutions from P13-2.
Analyze the liquidity, solvency and profitability of Wahlberg Company.
Recommend with supporting points, whether the Company should be considered as an acquisition target.
Following your reference page, include an outline that you used to develop your summary
The comparative statements of Wahlberg Company are presented here.
Problem 13-A2
WAHLBERG COMPANY | ||||
2017 | 2016 | |||
| Net sales | $1,890,540 | $1,750,500 | ||
| Cost of goods sold | 1,058,540 | 1,006,000 | ||
| Gross profit | 832,000 | 744,500 | ||
| Selling and administrative expenses | 500,000 | 479,000 | ||
| Income from operations | 332,000 | 265,500 | ||
| Other expenses and losses | ||||
| Interest expense | 22,000 | 20,000 | ||
| Income before income taxes | 310,000 | 245,500 | ||
| Income tax expense | 92,000 | 73,000 | ||
| Net income | $ 218,000 | $ 172,500 | ||
WAHLBERG COMPANY | ||||
Assets | 2017 | 2016 | ||
| Current assets | ||||
| Cash | $ 60,100 | $ 64,200 | ||
| Debt investments (short-term) | 74,000 | 50,000 | ||
| Accounts receivable | 117,800 | 102,800 | ||
| Inventory | 126,000 | 115,500 | ||
| Total current assets | 377,900 | 332,500 | ||
| Plant assets (net) | 649,000 | 520,300 | ||
| Total assets | $1,026,900 | $852,800 | ||
Liabilities and Stockholders’ Equity | ||||
| Current liabilities | ||||
| Accounts payable | $ 160,000 | $145,400 | ||
| Income taxes payable | 43,500 | 42,000 | ||
| Total current liabilities | 203,500 | 187,400 | ||
| Bonds payable | 220,000 | 200,000 | ||
| Total liabilities | 423,500 | 387,400 | ||
| Stockholders’ equity | ||||
| Common stock ($5 par) | 290,000 | 300,000 | ||
| Retained earnings | 313,400 | 165,400 | ||
| Total stockholders’ equity | 603,400 | 465,400 | ||
| Total liabilities and stockholders’ equity | $1,026,900 | $852,800 | ||
All sales were on account. Net cash provided by operating activities for 2017 was $220,000. Capital expenditures were $136,000, and cash dividends were $70,000.
Compute the following ratios for 2017. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%.)
| (a) | Earnings per share | $ | |||
| (b) | Return on common stockholders’ equity |
| % | ||
| (c) | Return on assets |
| % | ||
| (d) | Current ratio |
| :1 | ||
| (e) | Accounts receivable turnover |
| times | ||
| (f) | Average collection period |
| days | ||
| (g) | Inventory turnover |
| times | ||
| (h) | Days in inventory |
| days | ||
| (i) | Times interest earned |
| times | ||
| (j) | Asset turnover |
| times | ||
| (k) | Debt to assets ratio |
| % | ||
| (l) | Free cash flow | $ |
3.61
Explanation & Answer
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Student’s Name:
Professor’s Name:
Institutional Affiliation:
Date:
THE LIQUIDITY, SOLVENCY AND PROFITABILITY OF WAHLBERG COMPANY
Solvency, liquidity and profitability are important, and successful companies are both solvent,
own a lot of liquidity and are very profitable. A sum of financial ratios are used to gauge a
company’s liquidity, solvency and profitability. The vast common of which are argued in this
paper.
The owners of the Wahlberg Company supply the equity invested in the company. The equity is
measured as the ratio of profit generated to the total investment capital provided by the owners of
the company. Therefore the return on equity measures the profitability with which the company’s
money was managed. Since the executive board is straightforwardly responsible to the firm, they
capitalize on profit equity within bearable limits of risk which is crucial and proper apprehension
of executive management is required. At the top level of the executive management and outside
the company, return on equity is the most usual expression of ROI idea apple to the company
performance (Almarzoqi, Ben, Scopelliti, & International Monetary Fund, 2015,).
In the coefficient table it is observed that the liquidity ratio has a positive impact in performance
in both standardized and un- standardized and significant. In the solvency ratio overall values
shows the negative impact on performance in both standardized and in standardized and
significant. Liquidity in the company shows a positive result. Th...
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