Financial Accounting:  P9-13 Donna Szabo Corporation

Financial Accounting: P9-13 Donna Szabo Corporation

Financial Accounting

P9-13
Consecutive five-year balance sheets and income statements of Donna Szabo Corporation are shown below and on the following page.
Required
a. Compute or determine the following for the years 2003-2007.
1. Degree of financial leverage
2. Earnings per common share
3. Price/earnings ratio
4. Percentage of earnings retained
5. Dividend payout
6. Dividend yield
7. Book value per share
8. Materiality of options (use stock options outstanding)
b. Comment from the perspective of an investor.

Donna Szabo Corporation
Balance Sheets
December 31, 2003 through December 31, 2007
(Dollars in thousands) 2007 2006 2005 2004 2003
Assets
Current assets:
Cash 26,000 27,000 29,000 28,000 27,000
Accounts receivable, net 125,000 126,000 128,000 130,000 128,000
Inventories 140,000 143,000 145,000 146,000 144,000
Total current assets 291,000 296,000 302,000 304,000 299,000
Property, plant, and equipment, net 420,000 418,000 417,000 418,000 415,000
Total assets 711,000 714,000 719,000 722,000 714,000

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 120,000 122,000 122,500 124,000 125,000
Income taxes 12,000 13,000 13,500 13,000 12,000
Total current liabilities 132,000 135,000 136,000 137,000 137,000
Long-term debt 90,000 65,000 67,000 68,000 69,000
Stockholders' equity:
Preferred stock 49,000 76,000 80,000 82,000 75,000
Common stock 290,000 290,000 290,000 290,000 290,000
Paid-in capital in excess of par, common stock 70,000 70,000 70,000 70,000 70,000
Retained earnings 80,000 78,000 76,000 75,000 73,000
Total stockholders' equity 489,000 514,000 516,000 517,000 508,000
Total liabilities and stockholders' equity 711,000 714,000 719,000 722,000 714,000

Donna Szabo Corporation
Statement of Earnings
Years Ended December 31, 2003-2007
(In thousands, except per share)
Net sales 890,000 870,000 850,000 935,000 920,000
Cost of goods sold (540,000) (530,700) (522,750) (579,000) (570,000)
Gross profit 350,000 339,300 327,250 356,000 350,000
Selling and administrative expense (230,000) (225,000) (220,000) (225,000) (224,000)
Interest expense (9,500) (6,600) (6,800) (6,900) (7,000)
Earnings from continuing operations before income taxes 110,500 107,700 100,450 124,100 119,000
Income taxes (33,000) (33,300) (32,100) (30,400) (37,400)
Earnings from continuing operations 77,500 74,400 68,350 93,700 81,600
Extraordinary gains, net of taxes 20,000 - - - -
Net earnings 97,500 74,400 68,350 93,700 81,600
Earnings per share:
Continuing operations 2.67 2.57 2.36 3.23 2.81
Extraordinary gain 0.69 - - - -
Net earnings per share 3.36 2.57 2.36 3.23 2.81

Note: Additional data:
1. Preferred stock dividends (in thousands):
2007 3,920
2006 6,100
2005 6,400
2004 6,600
2003 6,000
2. Common shares outstanding, 29,000,000 (actual) (2003-2007)
3. Stock options outstanding, 1,000,000 (actual) (2003-2007)
4. Dividends per common share (actual):
2007 3.16
2006 2.29
2005 2.10
2004 2.93
2003 2.80
5. Market price per common share (actual):
2007 24.00
2006 22.00
2005 21.00
2004 37.00
2003 29.00
Financial Accounting: P9-13 Donna Szabo Corporation
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