ACC - JD Campbell and Associates

JD Campbell and Associates is considering an investment in the common stock of a chain of retail department stores. He has narrowed his choice to two retail companies, Heckle Corporation and Jeckle Corporation, whose income statements and balance sheets follow.

HECKLE CO.
INCOME STATMENT
FOR THE PERIOD ENDING DEC. 31, 2013

NET SALE: $12,560,000
COSTS and Expenses: 6,142,000
Selling Expenses: 4,822,600
ADMIN EXPENSES: 986,000
TOTAL COsts and Expenses: 11,950,600
Income Before income taxes: 415,400
Income taxes expense: 200,000
Net income: 215,400
Earnings per Share: ?

JECKEL CO.
INCOME STATEMENT
FOR THE PERIOD ENDING DEC. 31, 2013

NET SALE: $25,210,000
COSTS and Expenses: 14,834,000
Selling Expenses: 7,108,200
ADMIN EXPENSES: 2,434,000
TOTAL COsts and Expenses: 24,376,200
Income Before income taxes: 605,800
Income taxes expense: 300,000
Net income: 305,800
Earnings per Share: ?

BALANCE SHEET/DEC. 31, 2013
FOR: HECKLE CO.
ASSETS
CASH: $80,000
MArketable Securities at cost: 203,400
Accounts Receivable, Net: 552,800
Inventory: 629800
Prepaid Expenses: 54, 400
Pro, plant, & equipment, Net: 2,913, 600
Intangibles and other assets: 553, 200
Total Assets: $4,987,200

Liabilities and Stockholder's Equity
Accounts payable: $344,000
Notes Payable: 150,000
Income Taxes Payable: 50,200
Bonds Payable: 2,000,000
Common Stock $20 par: 1,000,000
Paid in Capital: 609,800
Retained Earnings: 833,200
Total Liabilities and SE: $4,987,200


BALANCE SHEET
FOR: JECKEL CO.

ASSETS

CASH: $192,400
MArketable Securities at cost: 84,600
Accounts Receivable, Net: 985,400
Inventory: 1,253,400
Prepaid Expenses: 114,000
Pro, plant, & equipment, Net: 6,552,000
Intangibles and other assets: 144,800
Total Assets: 9,326,600

LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable: $572,600
Notes Payable: 400,000
Income Taxes Payable: 73,400
Bonds Payable: 2,000,000
Common Stock $20 par: 600,000
Paid in Capital: 3,568,600
Retained Earnings: 2,112,000
Total Liabilities and SE: 9,326,600
During the year, HECKEL paid a total of $50,000 in dividends. The market price per share of it's stock is currently $60. In comparison, JECKEL paid a totalt of $114,000 in dividends, and the current market price of it's tock is $76 per share. HECKEL had net cash flow from operations of $271,500 and net capital expenditures of $625,000. JECKEL had net cash flow from operations of $492,500 and net capital expenditures of $1,050,000. Information for prior years is not readily available. Assume that all notes payable are current liabilities and all bonds payable are long term liabiliies and that there is no change in inventory.

Conduct a comprehensive ratio analysis of each company, using all available information. Compare the results. Round to one decimal place and consider changes of 0.1 or less to be indeterminate.

1) Prepare an Operating Asset Management Analysis by calculating for each company the :
a) current ratio d) day’s sales uncollected g) payables turnover
b) quick ratio e) inventory turnover h) days’ payable
c) receivables turnover f) days’ inventory on hand i) financing period

2) Prepare a Profitability And Total Asset Management Analysis by calculating for each company the:
a) profit margin b) asset turnover c) return on assets

3) Prepare a Financial Risk Analysis by calculating for each company the:

a)debt to equity ratio b) return on equity c) investing coverage ratio

4) Prepare a Liquidity Analysis by calculating for each company the cash flow yield

a) Cash flows to sales b) Cash flows to assets c) Free cash flows

5) Prepare An Analysis Of Market Strength by calculating for each company the:
a) price/earnings ratio b) dividend yield