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P15-32B Comparative financial statement data of Tanfield

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P15-32B Using ratios to evaluate a stock investment [40–50 min]
Comparative financial statement data of Tanfield, Inc., follow:

Comparative Income Statement
Years Ended December 31, 2012 and 2011

Net income 51,000 37,000

table on page 766 & 767 Horngren 9e

1. Market price of Tanfield’s common stock: $59.36 at December 31, 2012, and
$46.65 at December 31, 2011.
2. Common shares outstanding: 13,000 during 2012 and 11,000 during 2011
and 2010.
3. All sales on credit.

1. Compute the following ratios for 2012 and 2011:

a. Current ratio
b. Times-interest-earned ratio
c. Inventory turnover
d. Gross profit percentage
e. Debt to equity ratio
f. Rate of return on common stockholders’ equity
g. Earnings per share of common stock
h. Price/earnings ratio

2. Decide (a) whether Tanfield’s ability to pay debts and to sell inventory improved or deteriorated during 2012 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.

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