Question: Refer to Sanderson Company's financial information in Exercises II and I. Additional information about the company follows. To help evaluate the company's profitability, compute and interpret the following ratios for 2012 and 2011:
(1) return on common stockholders' equity,
(2) price-earnings ratio on December 31, and
(3) dividend yield.
Common stock market price, December 31, 2012 . . . . . . . . $15.00
Common stock market price, December 31, 2011 . . . . . . . . 14.00
Annual cash dividends per share in 2012 . . . . . . . . . . . . . . . . 0.30
Annual cash dividends per share in 2011 . . . . . . . . . . . . . . . . 0.15
Exercises I: Refer to the Sanderson Company information in Exercise 17-7. The company's income statements for the years ended December 31, 2012 and 2011, follow. Assume that all sales are on credit and then compute:
(1) days' sales uncollected,
(2) accounts receivable turnover,
(3) inventory turnover, and
(4) days' sales in inventory. Comment on the changes in the ratios from 2011 to 2012. (Round amounts to one decimal.)
Exercise II: Sanderson Company's year-end balance sheets follow. Express the balance sheets in common-size percents. Round amounts to the nearest one-tenth of a percent. Analyze and comment on the results.
At December 31 2012 2011 2010
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,800 $ 35,625 $ 36,800
Accounts receivable, net . . . . . . . . . . . . . . . . . . . 88,500 62,500 49,200
Merchandise inventory . . . . . . . . . . . . . . . . . . . . 111,500 82,500 53,000
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . 9,700 9,375 4,000
Plant assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . 277,500 255,000 229,500
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $518,000 $445,000 $372,500
Liabilities and Equity
Accounts payable . . . . . . . . . . . . . . . . . . . . $128,900 $ 75,250 $ 49,250
Long-term notes payable secured by
mortgages on plant assets . . . . . . . . . . . . . . . 97,500 102,500 82,500
Common stock, $10 par value . . . . . . . . . . . . . . 162,500 162,500 162,500
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 129,100 104,750 78,250
Total liabilities and equity . . . . . . . . . . . . . . . . . . $518,000 $445,000 $372,500