Problem: Condensed balance sheet and income statement data for Mere Corporation are presented here.
MERE CORPORATION
Balance Sheets
December 31
Assets 2007 2006
Cash $ 25,000 $ 20,000
Receivables (net) 70,000 62,000
Other current assets 80,000 73,000
Long-term investments 75,000 60,000
Plant and equipment (net) 510,000 470,000
Total assets $760,000 $685,000
--------------------------------
Liabilities and Stockholders' Equity 2007 2006
Current liabilities $ 85,000 $ 70,000
Long-term debts 80,000 90,000
Common stock 320,000 300,000
Retained earnings 275,000 225,000
Total liabilities and stockholders' equity $760,000 $685,000
MERE CORPORATION
Income Statements
For the Years Ended December 31
Sales $750,000 $670,000
Cost of goods sold 440,000 400,000
Operating expenses (including income taxes) 240,000 220,000
Net income $ 70,000 $ 50,000
Additional information
Cash from operating activities $87,000 $60,000
Cash used for capital expenditures 45,000 38,000
Dividends paid 20,000 15,000
Average number of shares outstanding 32,000 30,000
Instructions:
Compute these values and ratios for 2006 and 2007.
a) earnings per share
b) working capital
c) current ratio
d) debt to total assets ratio
e) free cash flow
f) based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2006 to 2007 of Mere Corporation.