Thursday, March 18th, 1999
Announcements: none

Lecture notes:

	1/1/98	12/31/98
Buildings	75,000	95,000
AD	38,000	49,000

Loss from sale of buildings = $4,000
The book value of the buildings sold during 1998 was $30,000 (AD = $10,000)
Proceeds = $26,000

ACCUMULATED DEPRECIATION
10,000 AD, old asset	38,000 Beg Bal X
	49,000 End Bal

X = Depreciation Expense = $21,000

BUILDINGS
Beg Bal 75,000 X	40,000 cost of assets sold
End Bal 95,000

X = Buildings = $60,000

Example:

	1/1/98	12/31/98
AR	40,000	53,000
Inventory	75,000	60,000
AP	30,000	21,000

1998 Net Sales = $115,000
1998 COGS = $65,000

Net Sales	115,000
- change in AR	- 13,000
	102,000

Cash Payments to Suppliers

COGS	65,000
- change in Inv	- 15,000
+ change in AP	+ 9,000
	59,000

Current Assets / Current Liabilities

COGS / Average Inventory

Gross Margin / Net Sales

Net Income / Net Sales

Net Income / Average Total Assets

Net Income / Average SE

Total Liabilities / SE

(Net Income - Preferred Dividends) / Average # of shares of common stock

Market Price per Share / Earnings per Share

Dividends per Share / Market Price per Share

Example:

A company issued common stock in exchange for cash. What is the impact of this transaction on the required ratios?

Current = higher	Inventory Turnover = none	Gross Margin = none
Profit Margin = none	Return on Assets = lower	Return on Equity = lower
Debt to Equity = lower	Earnings per Share = lower	Price Earnings = higher
Dividends Yield = none

A company switched from FIFO to LIFO during a period of rising prices. What is the impact of the change on ratios?

Current = lower	Inventory Turnover = higher	Gross Margin = lower
Profit Margin = lower	Return on Assets = higher if > 2 before change, lower if < 2	Return on Equity = higher if >2 before change, lower if < 2
Debt to Equity = higher	Earnings per Share = lower	Price Earnings = higher
Dividend Yield = none

Inventory costing $60,000 was sold for $80,000. What is the impact of this transaction of the ratios?

Current = higher	Inventory Turnover = higher	Debt to Equity = lower
Earnings per Share = higher	Price Earnings = lower	Dividend Yield = none
Gross Margin & Profit Margin = lower if the ratio previous to the transaction is > 25%, higher if ratio previous to transaction is < 25 % (20,000 / 80,000 = 25%)
Return on Assets & Return on Equity = higher if ratio previous to transaction is < 2, lower if ratio previous to transaction is > 2

Current Ratio:
	Morton:	2,652,900 / 1,602,600 = 1.66
	Pound:	9,426,900 / 4,459,900 = 2.11
Gross Margin:
	Morton:	3,674,000 / 9,486,200 = .39
	Pound:	8,914,900 / 27,287,300 = .33
Debt to Equity:
	Morton:	3,602,600 / 4,609,500 = .78
	Pound:	19,459,900 / 9,903,000 = 1.96
Profit Margin:
	Morton:	542,600 / 9,486,200 = .057
	Pound:	873,200 / 27,287,300 = .032
Return on Assets:
	Morton:	542,600 / 8,212,100 = .066
	Pound:	873,200 / 29,362,900 = .030