Question

Comparative financial statement data for Cullumber Company and Crane Company, two competitors, appear below. All balance sheet data are as of December 31, 2017.

Cullumber Company Crane Company 2017 2017 Net sales $2,700,000 $930,000 Cost of goods sold 1,762,500 510,000 Operating expenses 424,500 147,000 Interest expense 13,500 5,700 Income tax expense 127,500 54,000 Current assets 411,100 194,636 Plant assets (net) 798,000 209,592 Current liabilities 99,488 50,574 Long-term liabilities 162,750 61,026 Net cash provided by operating activities 207,000 54,000 Capital expenditures 135,000 30,000 Dividends paid on common stock 54,000 22,500 Weighted-average number of shares outstanding 80,000 50,000 (a) Compute the net income and earnings per share for each company for 2017. (Round Earnings per share to 2 decimal places, e.g. $2.78.) Net Income Earnings per share Cullumber Company $ $ Crane Company $ $ (b) Compute working capital and the current ratios for each company for 2017. (Round current ratio to 1 decimal place, e.g. 0.7 : 1.) Working Capital Current Ratios Cullumber Company $ :1 Crane Company $ :1 (c) Compute the debt to assets ratio and the free cash flow for each company for 2017. (Round debt to assets to 1 decimal place, e.g. 78.9%. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Debt to Assets Free Cash Flow Cullumber Company % $ Crane Company % $ LINK TO TEXT

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Answer 1

Net Income Cullumber Company Crane Company 372,000 4.65 Earnings Per Share $ 213,300 $ 4.27 Cullumber Company Crane Company Working Capital $ 311,612 4.1: 1 Current ratios $ 144,062 3.8 : 1 Cullumber Company Crane Company Debt to assets 21.7% 27.6% Free Cash flow $ 18,000 $ 1,500 Working Notes: Income Statement For the Year ended December 31, 2017 Cullumber Company Crane Company Sales $ 2,700,000 $ 930,000 Less: Cost of Goods Sold 1,762,500 $ 510,000 Gross Profit 937,500 $ 420,000 Less: Operating Expenses 424,500 $ 147.000 Operating Profit 513,000 $ 273,000 Less: Other Expenses and lossess Interest Expenses 13,500 $ 5,700

Income before Income Taxes Income Tax Expense Net Income Weighted No of Shares Outstanding Earnings Per Share 499,500 $ 127,500 $ 372,000 $ 80000 4.65 $ 267,300 54,000 213,300 50000 4.27 $ (b) Working Capital = Current Assets - Current Liabilities Cullumber Company = $411,100-$99,488 =$311,612 Crane Company = $194,636-$50,574 = $144,062 Currenyt Ratio = Current Assets / Current Liabilities Cullumber Company = $411,100/$99,488 = 4.1:1 Crane Company = $194,636/$50,574 = 3.8:1 (c) Debt to assets = Total Liabilities / Total Assets Cullumber Company = ($99,488+$162,750) ($411,100+$798,000) = 21.7% Crane Company = ($50,574+$61,026)/($194,636+$209,592) = 27.6% Free Cash Flow = Net Cash provided by operating activities - Capital expenditures - dividends paid Cullumber Company = $207,000-$135,000-$54,000 = $18,000 Crane Company = $54,000-$30,000-$22,500 = $1,500